Thursday, December 22, 2016

California Pension Crisis

I made the point a while back that if you know what's going on, you can do something about it.

Today, the difference between what all California government agencies have set aside for pensions and what they will eventually owe amounts to $241 billion, according to the state controller.

Maybe not.  Another thing is people know perfectly well what is going on, but go along for the rid, for the alternative is inconvenient, and well, they feel lucky.

The pension fund has not been able to catch up, even though financial markets eventually rebounded. That’s because during the lean years, older employees kept retiring and younger ones continued to build up credit toward their own pensions. Pay raises and extended lifespans have magnified the impact of the sweetened benefits.

OK, so it is impossible.  But for now, it looks good, and I can have car, house vacations, easy work...  why not get in for the ride?

One of the few voices of restraint back in 1999 belonged to Ronald Seeling, then CalPERS’ chief actuary.
“There was no real taxpayer representation in that room,” Seeling, now retired and living in a Dallas suburb, said in a recent interview. “It was all union people. The greed was overwhelming.”

Sure, anyone in on the deal knows it is unsustainable.  But the people benefiting from making the deal will be gone by the time the trouble arrives.

Davis, who was elected in 1998 with more than $5 million in campaign contributions from public employee unions, says that if he had it to do over, he would not support the pension improvements.
“If you’re asking me, with everything I’ve learned in the last 17 years, would I have signed SB 400…. no, I would not have signed it,” Davis, now 73, said in a recent interview at his Century City law office.

Oh Puhleeze...  if I knew all about unfunded pension liability as a manager of a tiny import export house in 1982, the Governor Gray Davis knew about it in 1999.  This fellow is so odious even California voters could not stand him, and threw him out of office in a recall.  He was replaced by the Governator.  He was bought and paid for, and paid off s required.

Now for the sheer delusion:

State pensions are funded by regular deductions from workers’ paychecks and contributions from the state. CalPERS invests the money to cover future benefits.

Hmmm...  think for a minute.  Where does the state get the resources to fund state employee paychecks?  Those resources, what are they?  Well, of course, taxpayers fork over every cent of a state employee's paycheck.  Every cent, for even "user frees" paid ultimately come from an end user, those too are just another name for a tax.  So when a state employee "contributes" to a plan, that very contribution came from the taxpayers to begin with.  So no state employee has ever contributed anything himself.  Next, what is being contributed?  Well, it is ex nihilo credit tally.  Since no one is using money anymore, and all is being tallied in the media of ex nihilo credit, its all just claims on a  balance sheet.  If you read the article in full, you'll catch that people game the system to get as much as possible, so their claims are bigger, and their pensions make them millionaires.  A further idea is when this crashes, as all know it will, pain will be prorated.  Not so far in Dallas.

Union leaders say their generous pensions are preserving the middle-class dream of a comfortable retirement.
“People should not have to work their whole life and never be able to retire,” said Dave Low, executive director of the California School Employees Assn.
“We need to fix the system … but fixing it doesn’t mean taking secure retirements away from the last people who have them.”

Does people who start working for the state at 30 and retire at 50 constitute working "their whole life?" What about how the middle class dream for someone who puts in 20 years in a state job is the middle class nightmare for the private sector person who has to "to work their whole life and never be able to retire" to pay for the state retiree?

The enhanced benefits stand in stark contrast to the financial insecurity facing most Americans in retirement. The vast majority of private sector workers have no pensions and very little retirement savings, and will depend largely on Social Security payments, which average about $16,000 per year.

So the Russians stole the election for Trump.  The 50 year old retirees squirm while they go over "if only" scenarios...  "if only we had no electoral college..."  Never mind half of the voters said the policies in which they are the losers hurt too much.  It does not matter who won.  Hillary would burn the pensioners too, to get re-elected.  The jig is up.

A side note.  I teach at various schools in California.  The model I negotiate with the schools is I get 1/2 the gate, meaning we count the enrollees and multiply by the course fee, and then split the revenue.  When I teach, necessarily the school makes income, meaning the taxpayers benefit when I teach.  I refuse to work on a flat rate because the taxpayers are at risk if the enrollments are low, or hourly because with the 50/50 split risk I always make more.  If people can't make money with me, I don't want to work with them.  Having said all that, even though I bring money to the schools when I teach, some schools from time to time pay me in warrants. That is to say they do not have any funds to pay me, so they write an IOU.  Now since this is a state entity, the banks will accept them, for complex reasons, but if any element of those complex reason prove false, then I am holding an IOU.  At that point, it is get in line behind everyone else.

Back in 1982 I realized, during the negotiations with the Longshoremen, that working for anyone else would be a dead end.  We on the management side won the fight, but I could see we would lose the war.  Self-employment is not just an option, it is the only path.

Where activities are usually completely state-controlled, like an avocation I have, teaching, you can get around the trap of "benefits" of employment through that old free-market mechanism of contracts.  "Let's make a deal:  I bring you money, you give me half..."

Starting your own business, I truly don't care what it is, will be doing well while doing good for the next 40 years.  Whatever you do, forget about your ephemeral  pensions or social security.  fighting over that will be like pigs at a trough.

If your business plans run to International trade, there are some links to classes I teach on the upper right of this blog.

Feel free to forward this by email to three of your friends.


Anonymous said...

“A people that elect corrupt politicians, imposters, thieves and traitors are not victims... but accomplices.”
-George Orwell.