City Journal Spring 2014

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Spring 2014
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Tim Cavanaugh
Ending California’s Numbers Game « Back to Story

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If The Democrats Didnt Give Sweetheart Deals To Your Public Service Union.
Goon Employees To Get Reelected; You Would Have Plenty Of Money and The.
Taxpayer would have Some Spare Change in His Pockets! Democratic Hustler
Politicians + Corrupt Union Goons = BANKRUPTCY BABY! Time To Bring.
RICO Conspiracy Charges Against The Hustler Corrupt Democrats and the.
Criminal Unions!
Ending California's Numbers Game will only happen with a clear accounting of what it costs to deliver essential services and infrastructure, and who benefits. Cherry picking employee costs, and demonizing teachers, police, fire fighters, water/sewer managers, road crews, etc. does not enable an informed discussion of these costs/benefits.

Because almost all the use of these services is devoted to producing goods and services, moving them to market, and getting employees to and from work, a comprehensive cost/benefit analysis has to be related to compensation. Business Owners/CEO should pay based on their relative compensation rates, and employees should pay based on theirs.

Until that accounting report is completed, spurious arguments and special interests will flourish.
John CPA - I don't understand why you conclude the accounting changes are not a "big thing". This would only be true if there already was a sound general understanding by the public as to the extent of underfunding of pensions in California. I highly doubt there is a sound general understanding, and many who do understand the nature of this financial shipwreck engage in various forms of denial, cognitive dissonance, and evasiveness, just as the pointed out by Tough Love below. Really, once the public writ large understands, after the accounting changes, that all of the property tax budget (and likely then some) should go to government pensions, you think the impact will be no big deal? This means no money for schools, parks, public works, public safety, you name it. I am not a cpa, but believe strongly in the value of accurate accounting. The liberal indoctrinators in our universities don't teach it or are even aware of accounting principles, but the notion that a dollar of revenue and expense should be considered the same in Des Moines as it is in Sacramento or New York city is absolutely essential to support a market economy based on trust. Change the government accounting standards, and the public will have a much better picture as to what is going on. Hardly no big deal.
Political Ideology following the traits and beliefs of clowns. Clownism promotes cars with doors that fall off and a large production of custard pies as well as big red noses and silly clothes.
Clownism isnt respected and isnt adopted by any country except there has been talk of all the worlds clowns uniting together and taking over Ohio in the U.S. they will take Ohio, rename it JOKEHIO and make its leader Bippo the Clown supreme lord.
Robert Citron, Treasurer of Orange County, produced a rate of return for the Orange County Pool which was half again higher than comparable asset managers. Yet, he could truthfully say that the Pool was invested mostly or exclusively in U.S. Treasuries. He was able to do this because the margin requirement for Treasuries was only 10%. In the years of continually falling interest rates, hence continually rising Treasury prices, it was practical to buy Treasuries on a narrow margin and take a capital gain when they appreciated. Yet, in 1994 the Fed raised short term interest rates six times, causing bond prices to fall. In that case, buying bonds on margin is as disastrous as it had been profitable before. Citron couldn't meet the margin call and Orange County filed for bankruptcy protection. So, while it is important for CalPERS and CalSTRS to assume reasonable rates of return for their portfolios, it is at least as important for them to assume those rates of return at safe levels of associated risk. Otherwise, they'll give their pensioners what Citron gave Orange--a lemon.
GASB finally wakes up and does (almost) what FASB did in the early 1980's, to require a legitimate rate of return limit and report current values of plan assets.

This difference got the private sector to end defined benefit plans pretty much a long time ago.

GASB is criminally slow, here.
Kurt Hahn, You miss the point. By this time the Public Sector Unions and most Public Sector workers know that their pensions are well underfunded and in jeopardy, but they also know that PAST service accruals have much greater "protection" than FUTURE service accruals. Much of the Union tactics today are simply stalling reform efforts to get as much of their excessive pension accrual into the PAST service column before it all collapses.
PENSION REFORM NEEDED NOW ALONG WITH ATTENTION TO OBAMACARE COSTS DOWN THE ROAD

If Governor Brown does not step forward with meaningful reforms of the CalPERS and CalSTRS pension plans the State could go the route of Greece. With the passage of Proposition 30 the Legislature seems to have a sense that nothing more needs to be done. When the State has to pick upthe cost of Obamacare Medical expansion in 2016 the revenue gain from Prop 30 will have to go the the Medical State match. Add to that the growing pension cost and the huge unfunded liability for State retirees health insurance we have big problems.
This is good news, but we are stuck with Democrat's Socialist legislatures, but strict audits is a good start. The State cannot declare bankruptcy and the money will not come from the Marxist federalists in DC, so hopefully the Democrat/Unions will see the light and realize the money is not there and agree to a drastic reduction in their obscene retirement benefits.
The feds can print money , but not the State of California.
Just some thoughts.
In Australia the UniSuper (a well run superfund) has come out and said that with the new lower interest environment and projected lower returns they will not be able to meet the defined benefits in the future. Government is urging more funds to come out and say the same thing. The can will be kicked down the road as far as Politicians can kick it, then at the final hour a new deal will be done.

Pensions, like most debt will be defaulted on indirectly using massive inflation. If I was younger (50) I'd think about apprenticing in money printing equipment maintenance, as the babies will be run red hot to inflate away the problem. I may be wrong, but this is my view. False promises, avoided by inflation, halve the value of the pensions in real terms and they are affordable.
Increasing the amount of liabilities on the balance sheet will only result in higher interest rates being demanded by bond purchasers, which will affect the current budget in terms of interest costs. It is not a big thing.
Democratic Hustler Politicians + Corrupt Greedy Unions = BANKRUPTCY BABY!
L.A.s a very blue city, Nation says. Its not easy to do any meaningful reform. But the numbers are going to slap them in the face.

Worst .... ultimately the pension systems that are supposed to support hundreds of thousands of workers in their retirement will collapse .... all due to the grossly excessive promises and (to fend off the very much needed reform) the endless hiding of the real VERY high cost.
L.A.s a very blue city, Nation says. Its not easy to do any meaningful reform. But the numbers are going to slap them in the face.

This is one of the reasons why people, if they are able to, are fleeing California in general and southern California in particular.