more bad news from California

[reggie]

Re: more bad news from California

How amusing. You discount the MSM, but take the CALPERS statements at face value.

Where is your own thought and analysis?

Actually, I'm undecided because I do not have enough information right now and have not fully analyzed Calper's CAFR. Dut I am not going to jump up and down and buy-into a study (especially from Stanford), a few media reports and a statements from California politicians.

However, one thing is for sure, I understand precisely why there is this push to get the public to believe that Calper's requires $700M from the state budget. The question is, do you understand that reason?

[reggie]

Re: more bad news from California

Starving Steve's solution to California's budget mess:

Define the "budget mess".

[c1ue]

Re: more bad news from California

However, one thing is for sure, I understand precisely why there is this push to get the public to believe that Calper's requires $700M from the state budget. The question is, do you understand that reason?

There can be all sorts of reasons - the recent UC tuition fee hikes are fine example:

The UC system had a record revenue year in 2009 - largely due to federal stimulus spending.

However, at the same time the UC system's pension funds took a huge hit.

As a result, the $65M raised by increased tuition fees pretty much all went to the $100M in additional discretionary contribution to the UC pension scheme.

So once you complete your analysis, come on back and state whether CALPERS is having a problem or not.

The information you've provided here thus far is completely unilluminating.

From my view - it is almost certain that CALPERS is facing a problem as record numbers of state employees take forced or early retirement; in so doing this process forces CALPERS to realize much larger amounts of outgoing cash payments than they originally planned.

After all, a pension shortfall can always be made up with future greater growth...if there is time.

Time has run out.

[reggie]

Re: more bad news from California

There can be all sorts of reasons - the recent UC tuition fee hikes are fine example:

The UC system had a record revenue year in 2009 - largely due to federal stimulus spending.

However, at the same time the UC system's pension funds took a huge hit.

As a result, the $65M raised by increased tuition fees pretty much all went to the $100M in additional discretionary contribution to the UC pension scheme.

So once you complete your analysis, come on back and state whether CALPERS is having a problem or not.

The information you've provided here thus far is completely unilluminating.

From my view - it is almost certain that CALPERS is facing a problem as record numbers of state employees take forced or early retirement; in so doing this process forces CALPERS to realize much larger amounts of outgoing cash payments than they originally planned.

After all, a pension shortfall can always be made up with future greater growth...if there is time.

Time has run out.

Step one, I am attempting to see if there is any justification for the LA Times article (posted in the OP) stating that Calpers will ding Cali taxpayers $700M this year. While there's plenty of chatter in this thread, and lots of childish flames, I still see no justification for this specific claim, either within this thread or within the latest published CAFR. I'd really like to see someone address this specific budgetary issue.

PS. How does one "illuminate" a black hole?

[Starving Steve]

Re: more bad news from California

Define the "budget mess".

California's state currency is called, "the warrant", and it is a post-dated cheque which functions as money in that state.

If I ran a business this way, I would be in jail. Paying bills in a business (public or private) with IOUs is the definition of bankruptcy.

And how did Cal. get into this budget mess; i.e, paying its bills with post-dated cheques?

California thought that it could cut taxes, increase spending, and grow its way out of deficits, because and according to Arthur Laffer, "deficits didn't count".

California did grow, but California's deficits grew even faster.

As with Club Med, the tacit assumption in California was that its location in the Sun Belt made it immune to recessions. The tacit assumption was that recessions were part of life in the Rust Belt states, and that Sun Belt states were immune to deep recessions because of population growth and technological innovation.

And as with Club Med, the tacit assumption in California was that technological innovation in solar power and wind power schemes would make California immune to any harm from the cost of de-commissioning its atomic power plants and abandoning hydro-electric dam construction.

Another tacit assumption in California (as with Club Med) was that real estate values would go up forever, so real estate inflation would pay for everything, even any State of California budget deficit. Part-and-parcel to that assumption was that wages and pensions of workers (whether in the public sector or the private sector) would go up forever. In other words, inflation was a benefit to the State and hence: "deficits didn't count".

To understand the Great Recession, it is important--- very important--- to understand the boom years in the Sun Belt states and in the nations of Club Med. Understanding the tacit assumptions of Reaganomics and supply-side economics is key.

[reggie]

Re: more bad news from California

California's state currency is called, "the warrant", and it is a post-dated cheque which functions as money in that state.

If I ran a business this way, I would be in jail. Paying bills in a business (public or private) with IOUs is the definition of bankruptcy.

And how did Cal. get into this budget mess; i.e, paying its bills with post-dated cheques?

California thought that it could cut taxes, increase spending, and grow its way out of deficits, because and according to Arthur Laffer, "deficits didn't count".

California did grow, but California's deficits grew even faster.

As with Club Med, the tacit assumption in California was that its location in the Sun Belt made it immune to recessions. The tacit assumption was that recessions were part of life in the Rust Belt states, and that Sun Belt states were immune to deep recessions because of population growth and technological innovation.

And as with Club Med, the tacit assumption in California was that technological innovation in solar power and wind power schemes would make California immune to any harm from the cost of de-commissioning its atomic power plants and abandoning hydro-electric dam construction.

Another tacit assumption in California (as with Club Med) was that real estate values would go up forever, so real estate inflation would pay for everything, even any State of California budget deficit. Part-and-parcel to that assumption was that wages and pensions of workers (whether in the public sector or the private sector) would go up forever. In other words, inflation was a benefit to the State and hence: "deficits didn't count".

To understand the Great Recession, it is important--- very important--- to understand the boom years in the Sun Belt states and in the nations of Club Med. Understanding the tacit assumptions of Reaganomics and supply-side economics is key.

I have yet to see anyone define "the problem" in any sort of tangible way. We know the audited financial position of Calpers, and the state, and every single public bureaucracy within California. Now, we can certainly question the validity of these figures, and the reliability of the various auditors, but how hard is it to look at these entity's balance sheets, past revenues and expenses, and then draw a conclusion. Funny, I see quite a bit of chatter and references to other material, but I don't see anyone trying to embark on this very straightforward exercise. Only after that exercise is engaged, can anyone really attempt to accurate define the financial challenges we face.

So, rather than take a position on the conclusion of this effort, my position has been to engage a process, and to not draw conclusions until that process is reasonably completed.

[c1ue]

Re: more bad news from California

While there's plenty of chatter in this thread, and lots of childish flames, I still see no justification for this specific claim, either within this thread or within the latest published CAFR. I'd really like to see someone address this specific budgetary issue.

In your haste to attempt to provide an objective view, you failed to see that CALPERS neither denied the allegation - nor that said allegation was substantiated elsewhere.

So once again, I am unclear as to what you are trying to say.

http://www.thesunnews.com/2010/05/18...link=mirelated

Facing massive investment losses, a key committee of California's giant pension fund voted Tuesday to make the state increase its contributions to employee retirement benefits by $600 million in the coming fiscal year.

The demand comes as California grapples with a $19 billion budget deficit and a threat by Gov. Arnold Schwarzenegger to eliminate its welfare program.

The contribution increase would be for one year starting in July, but the California Public Employees Retirement System is likely to require similar increases in future years. Local school districts, facing their own budget struggles, also will see their pension contribution rates grow.

The development is driven largely by CalPERS' huge investment losses, but also because people are living longer and retiring earlier.

CalPERS, the nation's largest public pension fund, lost $55.2 billion, or a quarter of its value, during the 2008-09 fiscal year.

"The biggest reason why we need increases is the investment losses," said Alan Milligan, interim chief actuary for CalPERS. "Quite frankly, there's more to come."

The vote by CalPERS' Benefits and Program Administration Committee will go to the full board Wednesday. Nine of the pension board's 13 members sit on that committee, and none voiced any opposition.

CalPERS sets a state contribution rate every year, which the state is required to pay. Milligan said the investment losses will continue to affect the rate in coming years because of the "smoothing methods" adopted to spread the losses over a longer period.
CalPERS provides retirement and health benefits to more than 1.6 million public employees, retirees and families. The fund's value was $205 billion as of Friday.

The governor says the pension system is unsustainable and drains money from other state programs. This week, his office said retirement costs for government employees this year will exceed what the state is providing to the University of California and California State University systems. The cost for CalPERS is $3.5 billion and the cost for the separate teachers' retirement system is $1.2 billion, according to the governor's office.
On Tuesday, Schwarzenegger issued a statement saying the action by the CalPERS committee is further evidence that the system must be reformed.

"Every additional dollar we spend on state employee pensions is a dollar we take from education, health and public safety," he said.

A Republican lawmaker has introduced legislation to reform the system, in part by reducing benefits to newly hired state workers.

The contribution rate that the state pays to the California State Teachers' Retirement System, or CalSTRS, will not change in the next fiscal year, CalSTRS spokesman Ricardo Duran said. Unlike CalPERS, CalSTRS needs legislative approval for a rate change. Duran said that gives CalSTRS less opportunity to change its contribution level, and the rate has remained the same for the past 20 years.

"This being an election year, even though there's probably a need this year, we're holding off until next year to go to the Legislature with a funding solution of our own," Duran said.
State and local government pension and retiree health care plans are coming under scrutiny throughout the country because of their unfunded liabilities. That's the difference between current assets and what taxpayers will be required to pay government retirees in the long term.

Graduate students at Stanford University issued a report last month estimating California's unfunded pension liability at $239.7 billion for CalPERS and $156.7 billion for CalSTRS.
Less than two years ago, California's two major pension funds had estimated combined unfunded liabilities of $61 billion.

The Stanford study was commissioned by the Schwarzenegger administration but has been criticized by CalPERS and retiree groups for following accounting standards that are not used by the pension funds.

[reggie]

Re: more bad news from California

Here's my post from the CAFR thread.

This raid of CAFR funds is exactly like that. It is the next step towards complete bankruptcy and insolvency, which is inevitable. It is another step towards that ultimate bankruptcy of all governments when they take every piece of wealth away from the lower and middle class (the upper class will be safe of course) as is fast happening.

Precisely. However, in today's world, they don't actually have to raid the CAFR funds, they simply have to convince the public, through media propaganda and studies from academia, that the funds no longer exist.