Mish has another good piece on CalPERS and its overly optimistic estimate of returns they expect to get from their investments. CalPERS Earned 1.1% on Investments in 2011, Plan Assumptions are 7.75%
But wait – it gets worse. The Portland (Oreg.) Business Journal’s weekly has a top of the fold front page article this week on plans that many states plan to use “private equity” to fund public projects: State Explores Private Equity. Guess who much of the “private equity” is?
Way, way, way at the back of the story on page 34, we read that private and public union pension funds are interested in “investments” like this. Labor unions want to use their pension funds “and other investment assets” (whatever that is) on these infrastructure projects. Infrastructure is roads, schools (!), bridges, airports, rail systems (!) and water treatment plants.
Oh, and by the way, everybody is doing it – here in the U.S. and also in the United Kingdom, so it must be okay. It would be funny, if it weren’t tragic. States want to take money from their own pension funds.
State pension funds are already going backwards, but government officials can force taxpayers to put more money into the shrinking pension funds whenever they need it. They then spend the money on their own government projects, thus killing many birds with single stones.
Union construction workers will get jobs, state employees will get jobs, union officials will get fat paychecks, union political funds will distribute fat contributions to cooperating politicians – what’s not to like? Did somebody say, “massive cost overruns?” Killjoy!
If taxpayers won’t approve bonds, by golly, we’ll take it from the workers’ pension funds!