Tuesday, August 28, 2012

California near landmark pension reform

California near landmark pension reform - Inside Bay Area: ""If they don't" pass a reform package, "it's hard to see how the initiative wins," said Dan Schnur, director of the Jesse M. Unruh Institute of Politics at the University of Southern California. Legislative Democrats are poised to hold conference committee hearings early this week, followed by a floor vote "well before" Friday's midnight deadline for the legislative session. Senate President Pro Tem Darrell Steinberg, D-Sacramento, promised "comprehensive" fixes, which include raising the retirement age for government employees and capping their pension benefits at the state and municipal level, a plan they hope will be seen as closely resembling the governor's 12-point proposal. Unveiled in October, the governor's blueprint drew praise from pension reformers. Republicans copied it word for word into bills they hoped would go before voters alongside the Democratic governor's tax . . . "

The operative word here is "near."  Near, and yet so far . . . .

Monday, August 27, 2012

Illinois unions' offer - a "nonstarter"

Why, eventually, all public pensions will be abolished--

Illinois unions offer to pay more toward pension, but there's a catch - Chicago Tribune: "The union group's plan was a nonstarter for Gov. Pat Quinn, who is pushing for a more comprehensive pension overhaul. A Quinn spokeswoman dismissed the suggestions as "nothing new," adding that the proposal "would not solve the state's pension challenges, nor is it feasible." Union officials say the proposal is a "fair alternative" to the plan that House lawmakers could vote on Friday when they return to the Capitol. That measure, which already passed the Senate, would require lawmakers and other state employees to take lower cost-of-living increases if they want to keep their state health insurance and have salary increases totaled into their final pension earnings. Union representatives say the higher cost-of-living adjustments are needed to offset inflation. With an election looming Nov. 6, others dismissed the union's move as an attempt to derail any vote for pension reform."


Sunday, August 26, 2012

Illinois, public unions, and pension liabilities, Pt. 3

A broken system--Labor unions are by far the biggest campaign finance backers of Illinois Democrats--and the public interest is the victim!

Illinois fails to act on public pensions in special session - chicagotribune.com: James B. Kelleher - Reuters 7:43 p.m. CDT, August 17, 2012 -"SPRINGFIELD, Illinois (Reuters) - "The Illinois legislature failed on Friday to take any action to fix the state's woefully underfunded public retirement system because of fierce opposition from unions and concern about the response of voters in the November elections. . . .  Public opinion polls suggest most voters, who have seen private sector pensions eliminated or converted into 401(k) plans, want reform of the public pension system. But public sector unions are the biggest paymasters of the Illinois Democratic Party. On Wednesday, Quinn got a taste of the emotion surrounding this issue when he was heckled at a state fair by several thousand unionized state workers -- a group that helped narrowly elect him in 2010. Unlike California, where Governor Jerry Brown is seeking tax increases to help plug a budget hole, Illinois already has played this card. It sharply raised both business and personal income taxes in 2011, which did little to improve the state's structural budget deficit and huge backlog of unpaid bills. In April, Quinn proposed a pension fix that he said would save taxpayers up to $85 billion over 30 years and result in a fully funded system by 2042. The plan called for higher employee contributions, lower cost-of-living adjustments and a phased-in retirement age of 67 in exchange for access at retirement to state-subsidized healthcare. Quinn also wants obligations for teacher pensions outside of the Chicago Public Schools, which account for the bulk of the state's unfunded retirement liabilities, shifted to local districts from the state. Republicans fear a voter backlash if teacher pension costs are shifted to school districts, which could prompt higher property taxes in their stronghold of the Chicago suburbs. Labor unions are by far the biggest campaign finance backers of Illinois Democrats, more than doubling the second-largest group, lawyers . . . "

Democrats and Public Unions--a toxic combination for taxpayers!

Saturday, August 25, 2012

Illinois, public unions, and pension liabilities, Pt. 2

Illinois--kicking the can--doomsday looms--

Illinois fails to act on public pensions in special session - chicagotribune.com: " .  . . . Some Illinois lawmakers had warned that lack of action to fix the ailing pension system on Friday could threaten the already low debt ratings of the state. Rating analysts who cover Illinois at Moody's Investors Service, Standard & Poor's Ratings Services and Fitch Ratings did not immediately respond to a request for comment on the Illinois legislature's inaction. The state Senate adjourned on Friday without even voting on any pension measure. The House of Representatives briefly debated a proposed law backed by powerful Speaker Michael Madigan to curb the pensions of state lawmakers, which account for less than 1 percent of the unfunded state liability. It would have saved only a paltry $111 million by 2045, according to state budget estimates. While the House narrowly approved an amendment eliminating pensions for new legislators and requiring current legislators to choose between lower cost-of-living increases and state subsidized healthcare in retirement, Madigan did not call for a final vote on the bill and adjourned the session. . . . "

Friday, August 24, 2012

Illinois, public unions, and pension liabilities, Pt. 1

One thing the experience thus far in Illinois tells us is that the "hogs at the trough" will drive the cities, counties, and states into bankruptcy--completely disregarding the "public interest" and even their own "self-interest" as eventually the "trough runs dry"--

Illinois fails to act on public pensions in special session - chicagotribune.com: James B. Kelleher - Reuters 7:43 p.m. CDT, August 17, 2012 -"SPRINGFIELD, Illinois (Reuters) - The Illinois legislature failed on Friday to take any action to fix the state's woefully underfunded public retirement system because of fierce opposition from unions and concern about the response of voters in the November elections. Democratic Governor Pat Quinn had called lawmakers to the special one-day session to reform the most underfunded state pension system in the nation with $83 billion in liabilities. But negotiations quickly collapsed amid partisan bickering, with Quinn accusing minority Republicans of blocking reform and Republican Senate Leader Christine Radogno saying Quinn had failed to lead. The predicament of Illinois is the latest example of a nationwide problem of ballooning costs on pensions for government workers, such as teachers, as the population ages. State and local governments are facing tough decisions on how to cut pension costs that are taking a huge bite out of budgets. Illinois' financial condition is among the worst in the United States, on a par with California where three large cities have filed for bankruptcy protection, citing out-of-control pension costs. California and Illinois, the nation's most populous state and the fifth most populous, respectively, have some of the lowest credit ratings among the states. . . ."

Thursday, August 23, 2012

Illinois has worst unfunded pension liability in the US

Think California is in the worst financial shape of any state in the US? It would be but for Illinois--

Governor Quinn Issues Statement on Critical Need for Pension Reform: ""Illinois has an unfunded public pension liability of $83 billion – the worst in the nation. “Each day we wait to enact comprehensive pension reform, the problem gets worse. The unfunded liability will grow to more than $92 billion by the end of next fiscal year. Illinois is currently on track to spend more on pensions than education by 2016 . . . . "


Monday, August 20, 2012

How big is Social Security's funding shortfall?

Social Security--at least some people are starting to talk about it:

How big is Social Security's funding shortfall?
Over the next 75 years, after Social Security drains its trust funds, the massive program is scheduled to pay out $134 trillion more in benefits than it will collect in tax revenue, according to agency data. That's an immense number that could use ...

Social Security surplus dwarfed by future deficit
As millions of baby boomers flood Social Security with applications for benefits, the program's $2.7 trillion surplus is starting to look small. For nearly three decades Social Security produced big surpluses, collecting more in taxes from workers than ...

FACTCHECK: Social Security adds to budget deficit
Associated Press. WASHINGTON (AP) - Now that Social Security is paying more in benefits than it collects in taxes, there is a fierce debate among politicians, academics and advocates about whether those shortfalls are adding to the federal budget deficit.

Sunday, August 19, 2012

Public pension funds are ticking time bomb

Public pension funds are ticking time bomb: " . . . Moody's has announced it will start evaluating public pension-funding ratios using the high-grade corporate-bond rate, currently around 5.5 percent. That could affect credit ratings, debt-service costs and put some squeeze on operating budgets. The Governmental Accounting Standards Board announced it will require the unfunded portion of public pensions be calculated using the muni-bond rate, around 3 percent to 4 percent. Moreover, unfunded pension liabilities will have to be stated on the balance sheets of state and local governments. That will also affect creditworthiness. The problem with Arizona's public-employee pensions isn't that a few people abuse them. The problem is that they are financially unsustainable and constitute an unacceptable risk to taxpayers. When Arizona politicians wake up to that reality, there are three big reforms that will be necessary: The state constitutional provision that prevents benefits from being reduced has to be repealed or substantially amended. This problem won't be solved strictly by changing the rules for new hires. The age at which public retirement systems pay out full benefits has to be synchronized with Social Security. A transition has to take place from defined-benefit programs to defined contribution programs, similar to private-sector 401(k)s. Simply put, what taxpayers owe shouldn't be a function of anyone's shot in the dark about the performance of the stock market over 30 years."

Tweet Follow @hogsatthetrough

Saturday, August 18, 2012

Public Pensions kicking the can for how long?

U.S. public pension assets rose in 2011, so did obligations - chicagotribune.com: "Earlier this summer, the Pew Center on the States estimated pension systems were short $757 billion to pay for future benefits, based on data for the fiscal year that ended June 30, 2010. Voters and taxpayers worry that states, which for the mostpart are bound by law to make good on retirement promises to employees, will have to pull money from essential services to cover pension benefits. Employees, meanwhile, are alarmed that they will see greatly diminished retirement payments, which is especially troubling to those in states where public workers do not receive Social Security benefits."States have been digging themselves into this pension hole for some time," Kil Huh, Pew's research director, said in a presentation to the National Conference of State Legislatures onWednesday. The fight over the underfunding of public pensions has engulfed most of the country. Over the last three years almost all states have reformed their pension systems while members of the U.S. Congress have floated different ideas for reshaping the plans' financial structures. . . . "

Friday, August 17, 2012

California cities not prepared for growing retiree health costs

California--more fiscal trouble ahead--

Report: Major cities not prepared for growing retiree health costs | California Watch: "Most major California cities are failing to address the growing health care costs of government retirees, which have ballooned to more than $1 billion in some areas and soon could threaten municipalities' ability to pay other expenses, according to a recent financial analysis by a nonprofit research group. Eleven of 20 California cities with the biggest budgets do not set aside funds for future health care costs, the study by California Common Sense found.  Those cities – San Francisco, Oakland, Sacramento, Redding, Santa Ana, Long Beach, Glendale, Fresno, Riverside, Pasadena and Santa Monica – work under pay-as-you-go systems, meaning they pay benefits from their current operating budgets and do not accumulate funds for future payments. Combined, all 20 cities have promised $16 billion in future non-pension benefits, and $12 billion of that remains unfunded. The 11 pay-as-you-go cities are losing $2.2 billion in savings by not setting aside money, the analysis found. The $2.2 billion figure is derived from an estimate of each city's potential investment earnings at the 7.61 percent return rate set by the California Public Employees' Retirement System. . . ."

Thursday, August 16, 2012

Once, twice, three times at the public trough

Texas members of Congress dip once, twice, three times at the public trough | Texas Watchdog: "Of the state’s 34-member U.S. congressional delegation,12 are taking a pension from a public retirement plan, according to financial disclosures filed by the politicians. Among the best compensated in the pack is Republican Ted Poe, 63, a former prosecutor and judge in Harris County whose district includes Kingwood and Beaumont, who reported dual pension payments in 2011; he was paid $82,153 by Harris County and $57,229 by the Texas County and District Retirement System. U.S. reps, many of them former state elected officials, receive a congressional salary of $174,000. They are not prohibited from taking their taxpayer-subsidized retirement while serving in Washington. Steve Ellis, with the D.C. watchdog group Taxpayers for Common Sense, says public pensions make elected officials that much more out-of-touch with the retirement realities of private-sector workers, whose plans are usually packaged as defined contributions to a 401(k) or IRA. “The public derides career politicians, but that’s what a pension is generally for, rewarding someone for a career’s worth of work,” Ellis said. “At some point you have to question whether elected officials should be receiving pensions at all.”. . . "

Wednesday, August 15, 2012

Miami Beach code enforcement boss at center of FBI nightclub sting pleads guilty

Miami Beach code enforcement boss at center of FBI nightclub sting pleads guilty - Miami Beach - MiamiHerald.com: "Miami Beach’s lead code enforcement officer at the center of a bribery scandal that rocked City Hall pleaded guilty to a federal extortion charge Monday. In April, Jose L. Alberto, 41, was among seven Miami Beach employees arrested by the FBI on charges of conspiring to extort a South Beach nightclub owner out of $25,000 last year. In his plea agreement, Alberto admitted personally accepting $16,600 in bribes. Other charges in an indictment will be dismissed. Alberto, who was hired by the city in 1993, earned $122,000 with overtime pay in 2011 as the second-in-command of the Building Department’s code compliance division. Now fired, Alberto is facing up to six years in prison at his Nov. 2 sentencing before U.S. District Judge Robert Scola. Prosecutors accused Alberto and his colleagues of shaking down the owner of Club Dolce on Ocean Drive while demanding he pay for “protection” to avoid city fines and inspections. The sensational sting operation featured an undercover FBI agent posing as the club manager who fooled them all as he partied with some of the municipal employees. According to a recorded conversation in November 2011, the agent told Alberto that he “would take care of people” to ensure the nightclub’s success. Alberto responded: “As long as you ain’t no FBI or none of that s---. We are straight. . . . ”

Or as Obama might say: another hard working, underpaid public servant goes down.


Tuesday, August 14, 2012

California: Its Fatal Addiction to Bad Policy Hurts the Poor

Tough words, but unfortunately the truth:

California: Its Fatal Addiction to Bad Policy Hurts the Poor | Via Meadia: "More bad news from the Golden State: apparently not content with creating what amounts to a free life-insurance policy for state employees, California legislators are considering creating another open-ended budget commitment. This time, the new commitment will go to private-sector workers rather than public employees. SB1234, a new bill currently working its way through the state legislature, aims at supplementing Social Security savings for private sector workers by effectively creating a secondary, state-run pension system. The Mercury News reports: De Leon introduced the bill earlier this year in response to what he called the “looming retirement tsunami” as millions of low-wage workers face financial hardship in their retirement years. He says the program would act as a supplement to Social Security by offering private-sector workers a portable savings plan with a guaranteed return. . . . But while the concept of helping low income workers fund their retirement has merit, we question the prudence of California’s headlong rush toward another massive pension liability. As we’ve amply demonstrated on this blog, California can’t handle the burdens it’s got. Adding to them under the current conditions is utter lunacy. . . .  one of the consequences of feckless policy, bad decisions, and decades of fiscal irresponsibility is that you reduce your ability to do good things because you have behaved so stupidly and squandered so much money and credit in the past. California’s fatal addiction to bad public policy hurts ordinary people in the state, and especially hurts exactly the low income workers the new pension wants to help. California can’t run its schools, sustain its universities, jail its criminals or, much of the time, pay its bills. Unfortunately, it almost certainly can’t manage an expensive new pension program — or impose a new tax without crushing the businesses that hire the poor."


Monday, August 13, 2012

But all that changed on August 11th--

Noonan: A Nation That Believes Nothing - WSJ.com: "When Americans go to Europe they see everything but the taxes. The taxes are terrible. But that's Europe's business and they'll have to figure it out. Yes what happens there has implications for us but still, they're there and we're here. What Americans are worried about, take as a warning sign, and are heavily invested in is California—that mythic place where Sutter struck gold, where the movies were invented, where the geniuses of the Internet age planted their flag, built their campuses, changed our world. We care about California. We read every day of the bankruptcies, the reduced city services, the businesses fleeing. California is going down. How amazing is it that this is happening in the middle of a presidential campaign and our candidates aren't even talking about it? Mitt Romney should speak about the states that work and the states that don't, why they work and why they don't, and how we have to take the ways that work and apply them nationally. Barack Obama can't talk about these things. You can't question the blue-state model when your whole campaign promises more blue-state thinking. But Mr. Romney can talk about it. Both campaigns are afraid of being serious, of really grappling with the things Americans rightly fear. But there's no safety in not being serious. It only leaves voters wondering if you're even capable of seriousness. Letting them wonder that is a mistake."

But all that changed  on August 11th--

Romney's choice of Ryan reshapes race for White House | Reuters: "Romney's choice of the powerful chairman of the House of Representatives Budget Committee is likely to turn the campaign - which has focused largely on the economy and a series of nasty attacks by both sides - into more of a debate over government spending, specifically Ryan's controversial budget plan that would include reductions in health programs for the elderly and poor. Welcomed onstage by Romney before a cheering, flag-waving crowd in front of the retired battleship USS Wisconsin, Ryan said the United States is in a "dangerous" moment of trillion-dollar budget deficits and rising national debt. "We're running out of time and we can't afford four more years of this," said Ryan, 42, who has been in Congress for 13 years. "Politicians from both parties have made empty promises which will soon become broken promises with painful consequences if we fail to act now." And Ryan, in what could be taken as an acknowledgement that the Republican campaign is willing to engage in a risky debate over spending on popular programs, said: "President Obama and too many like him in Washington have refused to make difficult decisions, because they are more worried about their next election than they are about the next generation. "We won't duck the tough issues," Ryan said. "We will lead. We won't blame others; we will take responsibility."


Saturday, August 11, 2012

‘Financial urgency’ a useful tool

Miami’s ‘financial urgency’ draws criticism - Miami Beach - MiamiHerald.com: The best definition of urgency comes from the state Public Employees Relations Commission, which serves as the appeals board for labor disputes. But even that language is murky, calling it “a financial condition calling for immediate attention and demanding prompt and decisive action.” . . . Though challenging to define, urgency is easy to declare. The chief executive of a city or school district can do so without the consent of the legislative body involved, for example a city commission or school board. The CEO then has two weeks to negotiate with the labor unions. If no agreement is reached, the legislative body can unilaterally approve changes to employee contracts. Statewide, the provision has only been used a handful of times. Although the financial urgency statute became law in 1995 as a way to expedite negotiations in financial crises, it was seldom used until the economy tanked in 2008.In 2009, when the Pembroke Pines municipal charter-school system was facing a $2.1 million budget shortfall, the city used the measure to renegotiate its contract with the Broward Teachers Union. Pines commissioners invoked the statute a second time to make changes to the pension plan. Neighboring Hollywood has declared thrice financial urgency. Most recently, city leaders in 2011 relied on the law to slash police and firefighter salaries by 12.5 percent and general employee salaries by 7.5 percent to cover an unexpected budget hole. Miami has also been a repeat user of the statute. The city first declared financial urgency to help alleviate a $116 million budget deficit in 2010. Commissioners went on to cut more than $80 million out of union contracts by imposing pay cuts, eliminating perks and scaling back pension benefits. The actions took effect after three of the four union contracts had expired, and lasted one year. . . . "

"Financial urgency"--sounds like a tool every state, county and city in the US needs to have.


Thursday, August 9, 2012

Public Employees' Salary Packages Breaking Florida Cities

Government Excess and a Dirty Little Secret--

Public Employees' Salary Packages Breaking Florida Cities | Sunshine State News: "There are reported instances of retired public employees being paid more than those still working 40 hours per week, and if current trends persist, there will be more. While earning more than the governor, as a Miami Beach police sergeant did, and retiring with a six-figure income at 55 is nice, the problem is not just the retirement pay. Other costs, such as health insurance for retired workers, are huge. Florida residents may experience sticker shock as they pay for this kind of government excess while struggling to provide financial security for their own families. Back when I was a young and relatively na├»ve police reporter, I wrote a story about how underpaid the police were. In the 1960s, a captain in Jacksonville made about as much as a reporter. Later, someone began my education by taking me aside and introducing me to the concept of fringe benefits. At first, generous benefits were supposed to compensate for low pay. Public employees have proven adept over the years at ratcheting up their salaries and benefits. The police will use their political clout to get something extra, and then firefighters complain that they deserve parity. Other employees follow suit. Furthermore, they have learned that when local politicians won’t provide what they want, like a child running to Grandpa, they can go to Tallahassee and find a politician who will be willing to help. Sweet. Politicians love this because they can exchange promises for votes now, and stick future voters with the bill. But, as the late Herb Stein said, "If something cannot go on forever, it will stop.” One of the reasons California cities are falling like dominoes is the lavish public employee benefits politicians have dispensed like candy. The Leroy Collins Institute says that hard times are ahead in the Sunshine State, too, unless more is done. “A potentially ticking time bomb” is the wording used. The institute quotes the Florida League of Cities as saying places like Miami and St. Petersburg are seeing retirement costs that exceed 50 percent of their payrolls. . . . One dirty little secret is that city officials accept highly optimistic earnings scenarios for pension funds because that lowers the annual cost cities must pay to catch up on unfunded liabilities. . . . "

Wednesday, August 8, 2012

Congress Is Taking Another Vacation?

Does everyone in Washington take weeks and weeks of vacation? As if they are working so hard--

Congress Is Taking Another Vacation? Seriously? - The Daily Beast: "Lawmakers are departing town for a five-week break, leaving critical legislation behind. John Avlon on why we need to fire the jokers who’d rather play games than fix problems. Five full weeks of summer vacation have just begun for members of Congress. That’s after nine full weeks off so far this year—and the House gets six more away before the election. All that time off, a sweet health-care plan, and quasi-fame as well. Is this a good gig or what? But most folks only take time off when they get their job done—and that definitely isn’t the case for the 112th Congress."

Tuesday, August 7, 2012

Miami Beach Commissioners Still Unsure Why They Gave Extra Cash To Ousted Manager

Ignorance is bliss . . . until you find out what you did in ignorance--

Miami Beach Commissioners Still Unsure Why They Gave Extra Cash To Ousted Manager - Miami News - Riptide 2.0: "June's Miami Beach commission meeting ended with what seemed like a heartfelt bit of humanity. Commissioners agreed to keep axed City Manager Jorge Gonzalez on the books for another nine months while he burned vacation days so his family could keep its health insurance. But this is Miami Beach, the most corrupt town in Dade! So it should shock no one that a month later, the commission exploded into chaos when they finally realized what they'd actually done -- given Gonzalez, who was forced to resign because the code department spiraled into an FBI-investigated catastrophe on his watch, up to a $15,000 annual boost to his pension. Two weeks later, they're still trying to sort out the mess and decide who's to blame. "At its best, it was an oversight," Commissioner Ed Tobin says. "At its worst, it was a very sneaky trick to take hundreds of thousands from the taxpayers.""

Hey it's not like they were giving away their OWN money!!


Monday, August 6, 2012

"Trough has run dry"

Trough has run dry - one person's opinion from the San Bernardino County Sun--"Has anyone read an article or heard a news story where the San Bernardino police and firefighters and their unions took any responsibility for their actions? The answer is an obvious no! The city spends over 75 percent of its money to provide for these hogs at the trough. And when there is no money do the police and firefighters throw their hats in the ring and ask what they can do to help? Uh ... nope! Even though being a first responder has its inherent dangers, we might as well face one fact: Most police and firefighters go about their day-to-day jobs like anyone else. The mundane makes up 99.9 percent of their shifts. And although I do not want to take away from what some of them do, the rest just hang on like any cubicle worker in private business. And then they jump ship with huge vacation and sick leave payouts, many with a medical retirement that happened because they became too overweight and had non-life threatening injuries that some doctor said was duty-related. And this "disability" retirement is not taxed at the same rate as regular retirement. And now that there is no money in the trough, the police and firefighters go berserk because in the end they are all about themselves and care less about the public unless it is harassing young juveniles in the downtown area. . . . It's time police officers and firefighters from all cities and counties get a clue because we are broke and if they don't become part of the solution they will reap the rewards of a life of greed."

Saturday, August 4, 2012

State employee retirees' healthcare costs California billions (video)

State employee retirees' healthcare costs California billions, says report | news10.net: "A new report by California Common Sense estimates unfunded liabilities outside pensions, known as Other Post-Employment Benefits, to be more than $62 billion. "One of the things that may have caught many analysts and the state off guard was the rising costs of healthcare," California Common Sense Autumn Carter said. The report found: Costs have doubled every five years since 1999 If nothing is done, OPEBs will consume the entire state budget within 35 years. Pre-funding healthcare benefits annually, instead of pay-as-you, would save the state $21 billion in the long run."

Friday, August 3, 2012

America's Spain: California - Broke Cities

America's Spain: California - NASDAQ.com: "Broke Cities The bankrupt city of San Bernardino offers munibond investors another look - a more localized snapshot of financial incompetence. Because of accounting mistakes, city officials believed they had more money than was actually on hand. In fiscal year 2010-11, they mis-reported a balance of $1.7 million, when it was actually just $410,293. And the following fiscal year, the reported balance was $2 million, when it was really minus $1.18 million. Despite these serious flaws, politicians and credit analysts continue to laud munibonds for their "historically low default rates." And like sacrificial lambs, the dumb money is listening. Asset flows into munibond mutual funds through the first six months of 2012 is on pace to match or surpass the record years of 2009-10. Highly populated cities with large deficits like Cincinnati, Detroit, and Los Angeles look poised to follow San Bernardino's lead to financial oblivion."

Financial Oblivion Here We Come!


Thursday, August 2, 2012

More on America's Spain: California

America's Spain: California - NASDAQ.com: "Instead of tackling debt, California lawmakers approved a $68 billion project to build a high-speed train connecting Los Angeles and San Francisco. (A flight from L.A. to S.F. takes about one hour and costs around $100 one way vs. a 10 hour drive.) Interestingly, the approval allowed the state to collect $3.2 billion in federal funding that would've otherwise been rescinded. The federal government* rewarded California for needless spending projects, leaving U.S. taxpayers on the hook! Like many states, California is burdened by falling tax revenue, a $3.6 billion unfunded liability (per capita) for retirement benefits and rising Medicaid costs. Lack of employment is something California and Spain both share in common. According to Department of Labor Department figures, California's average unemployment rate from July 2011 through June 2012 was 11.2%. But its broader "under-employment" rate was an elevated 20.3%. Translation: Income tax revenue cannot increase with an employment market this weak. To solve its financial problems, Gov. Jerry Brown ( D ) wants California voters to approve "temporary" tax increases on the highest income earners along with the sales and use tax rate by 0.5%. The vote is set for November 2012. Will other states copy California by trying to coax taxpayers into paying higher taxes? California may be an extreme example of the fiscal challenges facing states, but it's still a good representation of big problems elsewhere."

*Thank you President Obama and the Democrats who "rewarded" these needless spending projects!


Wednesday, August 1, 2012

America's Spain: California

The Republic of Kalifornia? 

America's Spain: California - NASDAQ.com: "How safe are municipal bonds? The correct answer is that it depends on who you ask. Politicians say munibonds are still a good bet. Credit raters say that a AAA-rated bond is safer than a B- rated bond and actual credit risk is relative. Financial intermediaries (salespeople) promote munibonds (Nasdaq: FHIGX) for their tax free income. Let's take a quick look at California to see what's really happening in the $3 trillion munibond market. Case Study: The Republic of Kalifornia California is home to 37 million Americans and is a case study in fiscal insanity. On November 16, 2011, the Office of Legislative Analyst released a report forecasting a budget deficit of $3 billion at the end of 2011-12 and an operating shortfall of $9.8 billion by 2012-13. Today, California's actual budget deficit is now a $16 billion headache (up from $9 billion in January)."


IRS scrutiny on public pensions

The following is just one more reason all public pensions should be abolished--we just need one public pension program (which we already have)--it's called "Social Security."

Capitol Weekly: New scrutiny from IRS on public pensions: " . . . If the IRS determines charter school employees are ineligible, CalSTRS requested guidance on whether current members should continue unchanged, continue but accrue no new benefits, or be denied pensions and repaid for contributions. CalSTRS mentioned the legal problem of impairing the “contractual relationship” with members. Because CalSTRS members are not in Social Security, denying pensions for prior years may mean workers were not in any retirement system, a federal violation. At a town hall meeting in Oakland last March, said CalSTRS, the advance notice of new eligibility rules was called a “blueprint” by IRS employees. CalSTRS said the final version should be unambiguous and clear that the IRS makes final decisions."