No matter what position one may take on the financial wisdom of offering defined benefit pension plans to public employees, one point needs to be reiterated at a time like this: While it is true that an 80 percent funded status is considered adequate for a pension fund, it refers to an average across the business cycle.
It does not represent what should be necessary at the end of a bull market. This cannot be stressed enough, because it puts into proper perspective what has to be faced today.
A healthy pension system at the end of over a decade of extraordinary investment returns should be overfunded. Perhaps it is credible to be sanguine about falling a bit short of the 80 percent threshold after ten years of investment doldrums, but it is absurd, and dangerous, to pretend such a level of funding is adequate after ten or more years of spectacular investment gains.
The recent and long overdue correction in the stock market was triggered by a global pandemic that is going to paralyze huge segments of the U. The impact of investment losses will impact the pension funds in two ways. But the other impact, lower revenue, will pose a much bigger challenge, affecting the ability of cities and counties to pay for anything , including the pension funds. Not only will sales tax revenue falter, but state income tax revenues will fall. While it delivers big returns from the rich whenever Wall Street goes on a bull run, it forces state and local governments to cut services, raise taxes or borrow money in a downturn.
Instead, they have largely ignored the pension problem, with even Gov. They have continued to make punitive demands on businesses, increasing taxes and spending at every opportunity. They have enacted regulations that make affordable housing and energy financially impossible for private sector interests to develop. They have emptied the prisons and opened the borders, putting additional stress on public services. They have created a state where one little push will end the good times.
During good years, you prepare for bad years. Too bad the wisdom of the ages emphatically does not apply in woke California. Yet the teachers own public pensions depend on a healthy US market and stock returns.
Make the teachers unions accountable for this pension meltdown. Teacher pension fortunes go up and down wth the market; and not off the backs of state taxpayers. If teachers want to boycott and divest their public pension investments, then they alone take the financial risks of those demands. It is no longer our obligation to ball out their misplaced social agendas. If the teachers unions in this state were actually doing a credible job, we would protect and support them.
But they are not — we remain one of the worst performing K systems in the nation. Close it down, cash out the teacher pensions and start over again —with NO teachers unions tis time.
The San Bernardino City Council voted Tuesday to file for Chapter 9 bankruptcy after the interim city manager issued a report that outlined its dire straits. San Bernardino's bankruptcy decision comes only days after filings by Mammoth Lakes and Stockton in California.
These are the first bankruptcies in the state since Vallejo filed in Experts say this filing should not be lumped in with the other two California towns since it was an unusual circumstance. Both Stockton's and San Bernardino's fiscal troubles are due in large part to the massive housing downturn and recession that swept across California. Both towns were hit particularly hard by the foreclosure crisis , which left lots of abandoned homes and reduced property values in its wake.
That translated into lower property tax revenues , which are critical to supporting public services. Also, municipalities have also struggled from budget changes made on the state level. Suffering from their own massive budget shortfalls , Governor Jerry Brown and the state legislature made changes to vehicle tax money and redevelopment agencies that stripped locales of hundreds of millions of state funding.
The audit found Vernon operated with annual deficits in its general fund for more than 20 years, increasing spending and salaries while tapping dedicated funds, reserves, asset sales and other transfers. The audit said Vernon engaged in speculative investments without effective risk evaluation, including an "unreasonable'' natural gas deal that has cost it millions. It cited loose contracting practices and found problems in 21 of 25 city contracts examined, including lack of competitive bidding.
It said Vernon had weak internal financial controls and "may have provided legally questionable retirement benefits to certain current and past executives. Facebook Twitter Email. These California cities could be next in bankruptcy. William M. Find out the minimum wage in every state and DC in Two months after Stockton filed for bankruptcy it was followed by San Bernardino in August Though this southern California city had a slightly smaller population it carried much more debt.
Like Vallejo, a naval base closure cost the city some 10, jobs and sparked an economic downturn. By the City had cut nearly half of its full-time employees from 1, to approximately Other changes included contracting out services for a soccer complex, street sweeping and solid waste collection. Well-known in pop culture as the setting for television shows such as The O.
In fact, the county's debt was generated by a series of risky investments made by county treasurer Robert Citron based on advice from investment management firm, Merrill Lynch, which encouraged the inexperienced investor to follow a high-risk strategy. In November auditors told county officials that Citron had lost the county a serious amount of money. This led to his resignation and the county sued Merrill Lynch. But the events had much wider ramifications, and the county was forced to lay off workers, freeze new hires and make severe cuts to the budget.
In July Orange County made its last bond payment related to the bankruptcy. Read about the bankrupt billionaires who lost it all.
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