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« Every Commons ends in Tragedy | Main | The Eternal Debate with Collectivists (updated 16apr12) »

14 April 2012

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Barry Pruett

Great article George.

"A recent (1apr12) WSJ article reports that 'Stockton admitted that its biggest problem has been a lack of transparency resulting in a host of ‘hidden costs’ in labor agreements for ‘obligations that are often difficult for citizens to identify or understand.’"

Below is an article from the Bee from March 18th about which I did not have time to write.

http://www.sacbee.com/2012/03/18/4346573/pension-costs-eat-at-local-services.html

"Local cities, counties and special districts can't shrug off the payments and hope the economy will improve, bolstering the investments that pension funds rely on; instead, they're mandated by law to start fixing the problem."

I guess the solution from our local left (much the same as their solution for our national woes) is to put our collective heads in the sand.

billy T

Don't think things will improve in the near term. We already have been prepared with phrases such as "jobless recovery" and "the new normal". When the Feds tried to implement pension reform by raising contribution amounts required by new hires by a mind blogging .5% (that is one half of one percent)the predicted cacophony from Congress was "we are not going to balance the budget on the backs of the workers". Of course contribution amounts for everyone else remained the same. Some mean Republicans proposed .9% which did not fly. Back here in the Golden State, the teachers unions need the "tiny sales tax increase" to pass in November. CalSTRS is 4.5 billion in the hole annually to pay its obligations. If the measure passes, that means 100% of the school districts share would be needed just to fund the pensions. What, me worry? http://www.city-journal.org/2012/cjc0410ts.html

Russ Steele

Stocton is not the only City in trouble. Over the next four years, LA expenditures are now projected to exceed revenues by $372 million, an 80% increase from the June 2011 General Fund Budget Outlook of “only” $206 million.

Underlying this high speed fiscal train wreck is the four year increase in personnel costs of $828 million, including a $350 million bump in employee compensation, $338 million in higher contributions to the City’s two underfunded pension plans (including an incredible $266 million to the Fire and Police Pension Plans), almost $100 million more for very generous medical benefits, and more than $40 million in higher workers’ compensation expense.

At the same time, General Fund revenues are only increasing $504 million. And this projection may be an overly optimistic given the sorry shape of the City’s business unfriendly economy.

The rest of the story is HERE.

Russ Steele

California government pension systems are broke and insolvent but cities, counties and the state are in denial. They cannot continue to ignore reality and survive.

Los Angeles DWP pension system has $11 billion in unfunded liabilities.

The UC system pensions sytem is $21 billion in unfunded liabilities.

The State health care system is $48 billion underfunded

CalPRS has over $500 billion in unfunded liabilities. Then you have the teachers system in trouble.

“This week, the California State Teachers’ Retirement System released the actuary report by the consulting firm Milliman for the year ending June 30, 2011. It showed that the unfunded liability for CalSTRS’ defined benefit program actually increased from $56 billion to $64.5 billion – an obligation that will all but certainly fall on the backs of taxpayers. It jumped even though, with a rebound in the stock market last year, the market value of CalSTRS’ assets grew 19 percent, to $147 billion.

In 2000, the defined benefit program was more than 100 percent funded. As of last June, it was 69 percent funded.”

In fact it is insolvent. We are about to see the collapse of government pension systems in California—at the same time cities are going bankrupt—unable to pay for the pensions.

The full story is HERE.

Todd Juvinall

The issue is transparency. In California labor negotiations are discussed in "closed session". Having been in many of the closed sessions in the old days, I can confirm the strategy was always labor "peace" and keeping the employees from bringing the pitchforks. It was always my position the taxpayer should be able to listen to the negotiations in the chambers but I was alone. The local onion always supported my election opponents which didn't seem to harm me which allowed me to speak the truth. The public only got to see the final vote, none of the sausage making behind closed doors.

I has nothing against the people in the unions but they knew my position was "no public employee unions".

George Rebane

This morning I received an email from an RR reader who copied me on the post of a local leftwing blogger's lengthy critique of my column. The gentleman apparently went ballistic claiming that my column contained gross errors blaming CalPERS for Stockton's and other cities' financial ills.

Of course, no such blame was or can be placed. CalPERS is not responsible for fulfilling the pension obligations of jurisdictions which use it to manage their public employee pension portfolios. It is the jurisdictions which must assess the predictions of fund performance and make adjustments accordingly in their contribution schedules and/or calculate their expected shortfalls (unfunded liabilities).

Unlike my critic's political agenda manifest in his blog, the reading skills of the blogger have been in doubt for several years now.

Russ Steele

George is not the only one writing about Stockton and other cites and counties that may follow. Kevin Klowden writing at the Milken Institute asks: Are there other Stocktons out there?

The decision of Stockton, Calif. to consider bankruptcy has had ramifications throughout the state. The city's relative size of nearly 300,000 people and significant deficit that could reach as much as $38 million by next year raise significant concerns about the financial health of cities affected by the economic downturn, especially in California.

For investors and people living in California, the news is clearly a cause for concern. The question is not simply, "Will Stockton actually declare bankruptcy?" but, "Are there other Stocktons out there considering the same steps?" Although many of the factors that have pushed Stockton to this stage are much more severe in Stockton's case, the key elements of pension obligations, declining local revenues, and fiscal uncertainties at the state level are mirrored throughout California by many other cities, both large and small.

In many ways, Stockton mirrors the rest of California. Commitments made during boom times, such as higher pensions, are combining with the consequences of the recession and the burst housing bubble to severely dent the city's fiscal situation. Further exacerbating the difficulties are the massive deficits at the state level, which has led to significant cuts to funds for local programs such as education and the elimination of redevelopment agencies.

Pension obligations are the biggest concern, as cities that agreed to join CalPERS -- such as Stockton and Vallejo -- must match any contribution rules made by the state legislature. The result is that many cities, as was Stockton's case, lose control over significant portions of their budgets. And in poor economic times, they cannot raise the revenue needed to cover their obligations.

The rest of the article is HERE.

Scott Obermuller

Good posting George - But I wouldn't give Stockton too much credit for honesty. It's hard to not admit the problem when you are defaulting on your regular payments. LA is indeed the next big story (unless the state gov beats them to it). Government debt (at all levels) shouldn't be a partisan issue, but sadly it is. What few lefties there are that will face the facts quickly turn to class warfare and insist we need to pillage our neighbor to make up for any shortfall. The fact that the better off among us don't have anything close to the amount of money needed to right the ship doesn't slow their zeal for plunder. This is the result of a piss poor govt educational system that failed, for decades, to produce graduates that can grasp basic financial ideas. For now, though, I'll enjoy my hot mug of coffee and plan my day with a smile on my face and a song in my heart (the stereo, actually). Vivaldi is a pleasant choice when reviewing the day's news. Cheers!

billy T

Lovely morning, ya'll. Transparency is good, especially in this climate of distrust of government and skepticism that governments can be good stewards of the common money. This is not a political issue, albeit some bristle at any mention of their sacred cows. I have been waiting for the General Accounting Standards to be applied to local governments. I thought that law passed 2 years ago. I have no idea why NID joined CalPERS. They are rate payer owned and can adjust user rates to pay for their pension obligations. Now we are all stuck with the obligations, whether NID is available in our area or not. To repeat, transparency is great and should be an non partisan issue. I am cautiously optimistic that the trend will continue. For awhile there gov't was serving us dirty rice without the rice.

Douglas Keachie

The only PONZI scheme was the moving of jobs abroad, the selling of cheap Chinese made schlock, the wholesale destruction of a once sound mortgage system, and the decreasing of taxes on the wealthier under the totally deadpanned, "job creation" notion. If it weren't so sick, it would be funny, as all those who profited from these schemes take to loot and live in enclaves around the world for the super rich, and the new knights of the realm, Blackwater nee XE, and now, tada:

"Despite new ownership, a new board and new management, security contractor Xe Services LLC could never shake a troublesome nickname: the company formerly known as Blackwater.

Now, it's the company formerly known as Xe.

On Monday, Virginia-based Xe plans to unveil a new name—Academi—and new logo. In an interview with The Wall Street Journal, Ted Wright, president and chief executive, said the name change aims to signal a strategy shift by one of the U.S. government's biggest providers of training and security services.

Mr. Wright said Academi will try to be more "boring."

Founded by former Navy SEAL Erik Prince, the original Blackwater cultivated a special-operations mystique. But it was tarnished by a string of high-profile incidents, including a deadly 2007 shootout in Iraq that ultimately led to its reorganization and rebranding as Xe Services. Mr. Prince left the business in 2010, selling his stake to investor group USTC Holdings LLC."

http://online.wsj.com/article/SB10001424052970204319004577089021757803802.html

Todd Juvinall

The local lefty bloggers have nary a clue. But they are funny! Their heads are buried in the sand and it must be Bush's fault.

Todd Juvinall

George, here is a comment from Ben Emery from the local lefty bloggers screed. This is why he is irrelevant.

"Same ol’ same ol’. As Jeff reports those with pensions have been compromising and reducing for decades but liars like George never talk about when collective bargaining goes against workers. I think George is a smart man but he sure is stupid in love with an ideology that is completely destructive towards everyone. "

THEMIKEYMCD

Ponzi or pyramid scheme... both labels work. This is where Madoff got his business model.

billy T

Ponzi or pyramid scheme....yes, both labels are precisely accurate MickeyD. Perhaps a 3rd option might be Stockton Stockholm Syndrome.

Scott Obermuller

OK - I know I accused Douglas K and George of colluding on their posts. But it looks like Douglas and I are now working hand in hand. At 8:55 I had posted that the left would still blame the rich. And barely an hour later Doug comes through in spades. I swear I didn't have secret communication with him, it was just Douglas helping me prove my point. But bless him, he does it gratis, no payment is involved. Once again, I would ask him what level of taxation should they have paid and how much actual moolah would roll into the treasury? Since we are at the 100th anniversary of the Titanic proving that God can indeed, sink that ship, I wonder if the left believes that if only the richest 10% had thrown themselves overboard the vessel would have limped into port? Our level of debt is far beyond what all of us can repay, yet we still hear partisan cries of "get 'em!" The poor union schlubs in Stockton had a setup so generous that only 1 month of employment was sufficient for a lifetime of medical benefits. But of course, it was Bush's fault. And so we sink, with the passengers fighting over who gets the monogrammed life vests.

THEMIKEYMCD

Scott, I just mailed me 2011 taxes. I paid more in postage mailing my taxes than most 'americans' paid in total income taxes! #fairshare

Scott Obermuller

Mikey - what did you send them? Gold, I hope. That paper stuff ain't worth spit.
Just got back from Mr P's blog. Crazy man, crazy. It appears that George is just trying to scare folks again. Why Stockton would be fine if it weren't for the housing prices refusing to go up 40% year after year. Who knew? Don't blame the working union man, it's all Wall Street's fault. George is just a big liar, according to the middle of the road types. Of course, there wasn't any actual proof that anything he posted wasn't true, but hey - he's just a hot head and we can ignore him. Why are all the stewards running around telling us to get into the lifeboats, I need a refill on this glass.

George Rebane

Do reasonable people who generate wealth and are alarmed at the steady decline of their freedoms to do so, do they still see a means of coming together with those collectivists who place no limits on the property they appropriate by force, and then redistribute according to their sense of social justice? Could classical liberals today gather in a large room with collectivists (such as we read here and across the land) and once again forge a new Constitution? I see no possibility of that happening between the ideological cohorts that today live side by side in different universes.

If the return to original-intent states rights is not possible, is not a peaceful and orderly separation the only civilized solution? Have we not become a too big and diverse population, with less in common every day, to be ruled under a single government that can maintain the individual freedoms which were the motivating basis of this nation.

Russ Steele

ScottO your10:18

I suggest that you read the tutorial above at Russ9:53, it explains the issues in great detail. Let us know where you disagree.

Ryan Mount

George and Michael-

Mr. Frisch is claiming over on Mr. Pelline's blog that in some respects, you are in line with Governor Brown. And that because of partisan beliefs, you're not supporting his pension reform efforts. Man, I sound like the enabling child in a bad marriage: Mom, Dad told me to tell you...

http://sierrafoothillsreport.com/2012/04/14/the-incomplete-truth-in-our-local-newspaper/#comment-48253

In the spirit of civil discourse (not sure why he doesn't challenge you here? I mean, for once copy and paste seems appropriate.), would either of you care to address his points? This is such a serious topic, and it seems to me the devil's in the details.

George Rebane

RyanM 951am - thank you for the heads up. From what I've been told and seen, the nature of 'debate' there is markedly different than on RR. People who want to debate ideas that I support and/or generate know where such debate is possible. Going into a forum where one is called a "liar" is not the kind of positive reinforcement I care to provide.

Russ Steele

RyanM 951am — This is an extract from an article in the CalWatchDog by Katy Grimes in Feb 22nd 2012
Republicans Support Governor’s Proposal
Despite being largely ignored for any and all pension reform proposals during the past year, Republican lawmakers announced today a package of pension reform bills to support Gov. Jerry Brown’s recent reform proposal.

At a Capitol press conference today, a large group of Assembly and Senate Republicans said they are reaching across the aisle to ask Democratic lawmakers for support of Brown’s pension reform proposal.
Republicans said they also plan to propose other necessary reforms to augment the plan in order to stop abusive pension practices, and bring public employee pensions more closely in line with the private sector.

“Republicans believe that the Governor should have an up-or-down vote on his pension reform plan,” said Senate Minority Leader Bob Huff, R-Diamond Bar. “While we have heard Democrats give lip service about supporting his plan, none of their Members have committed to supporting it, or even carrying it.”

The highlights are mine. It appears the problem with pension reform in not the Republicans or the Governor, it is the Democrat controlled Legislature. I do not think that was discussed on the lefty blog.

Steven Frisch

I posted over there because there was a thread devoted to it. I know most of the readers here troll over there anyway.

For the record, I support the Governor's proposal, I am on record on the blogs going back a couple of years supporting aggressive pension reform, I have taken democrats to task for not supporting pension reform, and I support the position that the legislative Republicans have taken to advance a vote. I applaud the legislative republicans for doing so. There are some (about half) of legislative democrats that don't support the Governor's proposal. I will be the first to say THEY ARE WRONG.

So how about it Russ and George, how about endorsing the Governor's proposal?

George Rebane

StevenF 1129am - I am a longtime proponent of public service employee pension reform, and have written and talked extensively about it. To the extent that Governor Brown's proposals stop the hemorrhaging of the state's fisc, I support them - especially in the form of the bipartisan initiatives outlined in RussS' 1121am.

But my concerns go further in that our Governor does not promote policies that will return California into growth and prosperity, which is the real solution to ALL of our ills. His continued support of rogue agencies such as CARB in the enforcement of AB32 will trump any benefit that his pension reform proposals can achieve for the people of California.

David King

George said:

"His continued support of rogue agencies such as CARB in the enforcement of AB32 will trump any benefit..."

Fear not George!

In a move akin to the Friday dump, we got this.

We’re saved!!!

http://tinyurl.com/7nfx7lh

“WASHINGTON (AP) - The Obama administration said Friday it is creating a high-level working group to coordinate federal oversight of natural gas production, amid industry complaints that excessive regulation could stymie a natural gas boom that has pushed prices to 10-year lows.

In an executive order signed Friday, President Barack Obama said the group was needed to make sure a host of federal agencies that oversee drilling work together.”

It reminds me of this:

http://www.youtube.com/watch?v=Y0BdKkEKTrs

I feeling much better now! :(

billy T

Thank you Mr. King. Maybe this will turn that frown upside down. Short and sweet. http://www.youtube.com/watch?v=WLeSNNntRc0&feature=related :-)

David King

"Maybe this will turn that frown upside down."

I don't know whether to laugh or cry Billy T.

Scott Obermuller

Thanks Russ - I have been following that series and I would have to agree with the analysis, but I'm wondering if the State Gov is actually far more in trouble than they let on. Remember, CA gov has been essentially broke for quite a while and while they can't print their own money they do have various tricks of dubious legality that they employ that counties and cities can't. If the state suddenly had to come up with all of the cash that they owe right now, I think we'd find they are in worse shape than we've been told. It is only the specter of the wealthiest state in the union going under that causes the authorities to turn a blind eye towards this state's financial shenanigans. Certainly LA is a big issue and it will be interesting to see how that plays out. It's all a mess, and it isn't going to get any better with the leadership we have. Brown's pension "reform" is a joke. I love how we are supposed to support it as "a first step". That is in itself an admission that his plan is no good. We either fix the problem or we don't. A futile and impotent gnawing at the edges of the problem are a waste of time. And time is something we don't have.

Scott Obermuller

Yes Steve F - you also posted over there: "If these guys spent a little more time actually trying to find solutions and a little less time writing tripe we might be able to get something done." George has used considerable space in various postings to do just what what you now claim he hasn't. It would be interesting to have George re-post all of the various solutions he has proffered on this subject combined in one post and have you then quote all of it in Jeff's blog.

Dixon Cruickshank

as usual ie: keachie - how the hell did we get from pension reform to Blackwater??? anybody - BTW we had 2 famility memebers go back employed by them - wish I got a t shirt

I'll leave a light on boys - say'in

Ryan Mount

I really wish we could keep on target. As my Grandpa used to say, however, If Grandma had wheels, she'd be a wagon.

Xe(Blackwater) and CARB/AB32 seem irrelevant to this important topic of public employees retirement reform. This is not to say that they do not warrant discussion as well.

From what I can tell, Mr. Frisch and Mr. Rebane are in agreement with regards to pension reform. I'll go out on a limb here and say they are in agreement about 80%. And given that they appear both to be approaching this discussion from different positions, I'll take that 80%.

Steven Frisch

I agree Ryan, we are probably 80% in agreement. The difference is I will gladly shake hands with the Republicans in the legislature who are moving forward, and praise them for their leadership. As opposed to bringing up extraneous issues as an excuse to avoid praising a perceived 'enemy'.

Gregory

California's financial woes are not because our taxes were not high enough. It's a spending problem, and the Governor can't even get his own party, dominant in the legislature, to pass the modest cuts he proposed.

Personally, I think Brown is rerunning his Prop 13 strategy... after that loss, he became a born again cost cutter, using 'the people have spoken' as his justification. The new taxes will not win in November, it will be clear cutting is the only choice, and that cutting will either be done by an elected Governor or a special master put in place to sort out the bankruptcy.

The money that is in the Cal public pension funds is likely all there will be. Defined benefit is so 20th century... divvy up the funds into individual accounts like the rest of us have, and insure the most modest retiree benefit expectations are impacted the least.

Frisch seems like such a mensch when he is here, what a shame he doesn't sing the same song everywhere. Same goes for Ben Emery. Two faces per person is one too many.

Ryan Mount

> Frisch seems like such a mensch when he is here, what a shame he doesn't sing the same song everywhere. Same goes for Ben Emery. Two faces per person is one too many.

Can we just be happy that we're in agreement [mostly] here? Maybe happy is not the right word. Perhaps the word satisfied is better?

And I think your observations about Governor Brown are spot on.

Gregory

"Can we just be happy that we're in agreement [mostly] here?"

Not really. How can one be satisfied with an illusion of agreement when the Frischs of the world are not being candid? Smiling here, stabbing the Rebanes in the back when back on their home turf?

When Frisch sings the same song everywhere there will be progress. Don't hold your breath.

Ryan Mount

I understand (and have witnessed) your position and appreciate its honesty, but I also find it disheartening and frustrating. My hope is that by discussing the nature of our discourse, we can improve its tone and tenor. That's probably a pipe dream.

I'm bringing it up because RL Crabb raised the issue yesterday. The whole "you're an idiot, no you're the real idiot" cartoon.

Gregory

You're mixing two different issues, Ryan. Yes, oversimplified, the left thinks the right is stupid, and vice versa. This is about being straightforward and honest about what you think.

For the record, I don't think I've ever seen Rebane lie about anything. He does make the occasional mistake. I also think Ben Emery either owes everyone documentation about Rebane's lies, or owes Rebane a very public apology.

David King

without not with. Sorry.

Ryan Mount

> You're mixing two different issues

I don't understand what you mean by mixing two different issues. Can we have a discussion or not without calling people names, or to add to this discussion, accusing people of lying without substantive evidence? I think the answer is no, which is why I'm disappointed.

And as an attempt at a peacemaker, trying to connect Mr. Frisch and Mr. Rebane's perspectives seems to be lost in the noise. That'll teach me.

> This is about being straightforward and honest about what you think.

I wholeheartedly agree with you.

If you're(not you Greg, I mean the royal...errr...you) wrong, admit it. If you slander someone, apologize. If someone targets you, then ask them how that's relevant and wait for the answer. If you get no answer, then you have your answer. Is it more complicated than that? I just don't get the personal attack stuff. It serves no purpose and it is cretinous behavior.

Gregory

Ryan, perhaps I'm missing your point.

Do you think that the words here of the Frischs and the Ben Emerys should be treated as if they aren't calling folks names in other forums? Just pretend they are part of a reasoned discussion here while they are saying something entirely different elsewhere?

Sorry, no, the twofaced need a public calling out. And just accepting no answer for the answer is no answer! :)


Todd Juvinall

Gregory, you are simply right on the mark. What is common amongst liberals and their apologists is they never believe they are namecalling. The reason is becasue they think what they say about others is true, therefore, no need to apologize. Hence the confoundedness of Ryan Mount.

Frsch an Emery namecall on their brethren blogs and cry the blues on the conservative blogs that they are being picked on. Since none of the conservatives appear to be allowed to post on the "purple" blogs and their buddies blogs, how is it they could be upset? The Frischs and Emery have no competition in the namecalling they do on those lefty blogs. Spoiled brats is the best word I can come up with.

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