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FlashReport Weblog on California Politics

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Edward Ring

How Much Will YOUR City Pay CalPERS in a Down Economy?

When evaluating the financial challenges facing California’s state and local public employee pension funds, a compelling question to consider is just how much more will they demand from their clients in the next economic downturn?

It’s noteworthy that CalPERS still hasn’t issued their actuarial analyses for the period ending 6/30/2018, even though a year ago, the 6/30/2017 analyses were available. Could it be related to the fact that the DJIA index on 10/01/2018 was 26,447 and as of midday 10/01/2019 it sits at 26,599? Between 6/30/2018 and 6/30/2019, did CalPERS have a bad year? And what does that mean?

What is alarming in the case of CalPERS and other public sector pension funds is the relentless and steep rate increases they’re already demanding from their participating employers. Equally alarming is the legal and political power CalPERS wields to force payment of these rate increases even after municipal bankruptcies where other long-term debt obligations are diminished if not completely… Read More

Edward Ring

City of Oxnard Pension Contributions Set to Double by 2024

As reported by the Ventura County Star, the City of Oxnard faces budget headwinds.Quoted in the article, Mayor Tim Flynn had this to say:

“We’re making decisions that should have been made 10, 20 years ago to put the city on a sustainable path,” Flynn said. “These are very painful cuts, but we have to live within our means. The city historically has not lived within our means.”

City Manager Alex Nguyen was more specific:

“Skyrocketing pension costs and spikes in health care are some of the reasons for the budget shortfall. With projected expenditures approximately $10 million more than anticipated revenue, there is no choice but to recommend programmatic cuts to the City Council.”

Skyrocketing pension costs. You can say that again. Depicted on the chart below is a summary of what’s happening to Oxnard, thanks to “skyrocketing pension costs.” The biggest takeaway from this chart is the fact that Oxnard’s pensions have just begun to “skyrocket.” If you want to skip the details and cut to the… Read More

Katy Grimes

CA Dems Paint Rosy Picture of Failing California

The future of California is not looking as rosy as the state’s Democrat Party politicians want us to believe. Whenever challenged on the stability of his economy, Gov. Jerry Brown’s knee-jerk retort is, “Californiais the fifth largest economy on the planet,” as if the size of the economy in the most populous statein the nation is relevant. With nearly 40 million people, California now feels and looks like a Banana Republic in the cities, as well as rural areas in the state.

Whether you are forced to check the public defecation map to navigate the streets of San Francisco, are on the 57 freeway in Santa Ana looking at miles of homeless tent cities and camps, or you are dodging heroin-addicted homeless zombies around the State Capitol and on residential streets in Sacramento, the results are the same —Nearly one-third of the nation’s homeless population lives in… Read More

Edward Ring

Put Public Employees on Secure Choice and Social Security

“The state shall not have any liability for the payment of the retirement savings benefit earned by program participants pursuant to this title.” – California State Senator Kevin De Leon,August 7, 2016, Sacramento Bee

This quote from Senator De Leon, one of the main proponents of California’s new “Secure Choice” retirement program for private sector workers, says it all. Because De Leon’s comment reveals the breathtaking hypocrisy and stupefying innumeracy of California’s legislature.

Let’s start with hypocrisy.

De Leon is careful to protect private sector taxpayers from having to bail out their new state administered “secure choice” retirement plan, but no such safeguardhas ever been seriously contemplated for the state administered pension plans for state and local government workers. These plans, using official numbers, are underfunded by about $250 billion. If you don’t assume California’s 92 state and… Read More

Edward Ring

Average Costa Mesa Firefighter Makes Nearly $250,000 Per Year. Why? Pensions.

Does that fact have your attention? Because media consultants insist we preface anything of substance with a hook like this. It even has the virtue of being true! And now, for those with the stomach for it, let’s descend into the weeds.

According topayroll and benefit datareported by the City of Costa Mesa to the California State Controller, during 2015 the average full-time firefighter made $240,886. During the same period, the average full-time police officer in Costa Mesa made $201,330. In both cases, that includes the cost, on average, for their regular pay, overtime, “other pay,” the city’s payment to CalPERS for the city’s share, the city’s payment to CalPERS of a portion of the employee’s share, and the city’s payments for the employee’shealth and dental insurance benefits.

And if you think that’s a lot, just wait. Because the payments CalPERS is demanding from Costa Mesa – and presumably every other agency that participates in their pension system – are about to go way up.

We have obtained twoinnocuous… Read More

Edward Ring

Government Unions Benefit from the Asset Bubble that Harms Workers

Earlier this month the California Policy Center released astudythat provided additional evidence that the U.S. stock indexes are overvalued by approximately 50%, along with calculations showing the impact of a major downward correction on the solvency of California’s state and local government pension systems. Stocks are now at unsustainable bubble valuations.

Not covered in this study, but equally overvalued, are bonds, which pension systems misleadingly categorize as “fixed income” investments in their portfolio disclosures. CalPERS even went so far as to trumpet their success in earning a 9.29% return on “fixed income” investments in theirmost recent press release– a healthy return that offset losses elsewhere and allowed them to earn a marginally positive return of 0.61% last year. But “fixed income” investments usually refers to bonds, and bonds are also at unsustainable bubble valuations.

Here’s why bonds are… Read More

Edward Ring

Why Investment Realities Will Compel Pension Reform

“For the first timein the pension fund’s history, we paid out more in retirementbenefits than we took in contributions.” – Anne Stausboll,Chief Executive Officer, CalPERS,2014-2015 Comprehensive Annual Financial Report

There are few examples of a seemingly innocuous statement with more significance than Stausboll’s admission, buried within her “CEO’s Letter of Transmittal,” summarizing the performance of CalPERS, the largest public employee retirement system in the United States. Because what’s happening at CalPERS – they now pay more in benefits than they collect in contributions – is happening everywhere.

For the first time in history, America’s public employee pension funds, managing well over $4.0 trillion in assets, are becoming net sellers, not buyers. And as any attentivestudent of economics will tell you, when there are more sellers than buyers, prices drop. Behind this mega economic trend is a mega demographic trend – across the developed world, certainly including the… Read More

Katy Grimes

Assemblyman Travis Allen: CA Investment Policy Should Not Hurt Israel

A newly introduced bill by California State Assemblyman Travis Allen, R-Huntington Beach, seeks to forbid all state agencies in California from contracting with companies “engaging in boycotts based on race, color, religion, gender or nationality,” in support of California’s long history of trading with Israel.

Anti-Semitism runs deeply in California government, including inside the taxpayer-funded University of California system, and the state retirement systems.

Allen’s bill is aimed directly at the BDS movement (Boycott, Divestment and Sanctions), and the State of Israel. AB 1551, The California-Israel Commerce Protection Act, will require the State of California to divest from companies that boycott Israel.

CalPERS and CalSTRS have boycotted Israeli investments, and University of California campuses openly supported the Palestinian boycott of Israel.

Even student governments at UC Berkeley, UC San Diego and UC Irvine have endorsed divestment and sanctions of Israel.

If adopted, Assemblyman Allen said the billwould update the… Read More

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