Home › Forums › Financial Markets/Economics › More on public pensions and the economy
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no_such_reality.
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July 24, 2012 at 8:58 PM #20007July 25, 2012 at 6:27 AM #748882
no_such_reality
ParticipantSo Brian, do you agree with what he’s saying?
July 25, 2012 at 7:50 AM #748884CDMA ENG
ParticipantOh Boy… Here we go again…
Piggs… Clear to arm… Clear to fire.
CE
July 25, 2012 at 8:16 AM #748885The-Shoveler
ParticipantWhen even Brown says state and local public pension benefits are “unsustainable,”
You know you have a problem.
Monetize it or go bankrupt, those are the options we are left with at this point.
July 25, 2012 at 8:28 AM #748886Participant[quote=CDMA ENG]Oh Boy… Here we go again…
Piggs… Clear to arm… Clear to fire.
CE[/quote]
I’m actually curious if he does or doesn’t. Or agrees with the meme but not the solutions.
I doubt many on the board would consider Brian an anti-government ultra conservative.
July 25, 2012 at 9:50 AM #748892briansd1
Guest[quote=no_such_reality]So Brian, do you agree with what he’s saying?[/quote]
Yeah, I agree. Zacharia laid out some compelling facts about the public pension situation.
I support government in that I believe in services for citizens, especially citizens in need. The municipalities are cutting services while increasing taxes, laying off employees, and funding retirees who have become a privileged class.
July 25, 2012 at 10:28 AM #748897
CoronitaParticipant[quote=CDMA ENG]Oh Boy… Here we go again…
Piggs… Clear to arm… Clear to fire.
CE[/quote]
Duck under.
July 26, 2012 at 2:41 AM #748925CA renter
ParticipantOkay, I was going to be a good Pigg and ignore this thread, but just can’t help myself.
More lies, hyperbole, and misinformation in this piece, as seems to be the case 90% of the time these days.
For one thing, he mentions Mammoth in his list of troubled cities, while insinuating that pensions are the cause of these cities’ problems. Mammoth had to file for Chapter 9 because they lost a suit to a developer.
“The resort town of Mammoth Lakes sought protection on July 2 after a property developer won a $43 million court judgment against the city, a ruling that left the small town swooning.”
Regarding other specific points he notes in his article:
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“Take for example San Bernardino. It was running a $45 million deficit (on a $130 million budget.) [1.] But its creditors – workers and retirees – were unwilling to help out. The best the unions were able to do was to offer what they thought was a major concession: allowing newly-hired public safety workers to retire with 90 percent of their salary at the age of 55 – instead of 50, which had been the earlier deal!
That won’t work in a chapter 9 bankruptcy. An independent judge brings all parties to a table where an agreement has to be reached – no matter how painful. And, we need some of those painful decisions – not just at the federal level, but at local and state levels as well. [2.] At its heart, the bankruptcies you keep hearing about these days aren’t about taxes being too low or spending on city services being too high – they’re about pensions.
[3.] California’s pension-related costs rose 20-fold in the decade since 1999. This frightening trend is true almost everywhere in America. And it’s simply not sustainable. A recent Pew research survey found that the gap between state assets and their obligations for public sector retirement benefits is $1.38 trillion. It rose by 9 percent in 2010 alone – and it will likely keep rising until these obligations are renegotiated.”
1. This idiot tries to make it sound like public employees are the only municipal creditors. This is not true. There are bondholders and vendors, as well as other creditors. If we want the creditors to make concessions, then *everybody* needs to come to the table, the crisis was not caused by public sector workers, so they should not have to shoulder the entire burden of the economic crisis that they DID NOT create and had no part in.
Many cities greatly expanded their budgets for capital projects during the bubble. Many of these projects were unnecessary and over-the-top “monuments” on which politicians could place their names for all to see.
2. He claims the recent bankruptcies and problems in municipal finances are due to pensions rather than drops in revenue (and excessive spending in other areas). Again, nothing could be further from the truth.
John Husing’s report for San Bernardino:
http://www.ci.san-bernardino.ca.us/civica/filebank/blobdload.asp?BlobID=8382
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A great opinion piece by Harold Meyerson about the REAL reason for the municipal failures:
“The reporting and commentary on the bankruptcies of California cities over the last month haven’t been journalism’s finest hour. From reading the voluminous accounts of the fiscal woes of Stockton and San Bernardino, you’d think that municipal unions and feckless city officials are primarily what led these cities down the path to fiscal ruin.
But you’d be wrong. What bankrupted Stockton and San Bernardino were the most severe housing busts in the nation. What bankrupted those two cities were banks peddling subprime mortgages to poorly paid workers.”
“…What sets Stockton and San Bernardino apart is a far narrower set of circumstances: They were at the epicenters of the American housing bubble and the American housing bust.”
“How bad was the bust? Of the 372 federally designated metropolitan areas in the United States, Stockton ranks first in foreclosures, while Riverside-San Bernardino-Ontario ranks third. Among the thousands of U.S. cities, San Bernardino proper ranks third in foreclosures, while Stockton ranks fifth. Ranking the May unemployment rates in those same 372 metropolitan areas, with the area with the lowest unemployment listed as No. 1, Stockton ranked 364th and San Bernardino 354th. Unemployment in the city of Stockton in May stood at 17.5%. In San Bernardino, it stood at 15.9%.”
“Like all California municipalities, Stockton and San Bernardino depend on tax revenues — chief among them property taxes (recycled through Sacramento as a result of Proposition 13) and local sales taxes — to fund city operations. Amounts accrued from property taxes were greatly diminished by Proposition 13’s passage in 1978, but in cities with new construction and rising home values, such as these two, property taxes still provided a reliable stream of revenue until the foreclosure wave hit.
At that point, property values in both cities collapsed — and property tax revenues with them.
According to Leslie Appleton-Young, the chief economist of the California Assn. of Realtors, the median home value in San Bernardino County dropped a mind-boggling 65.6% — from an average of $350,290 at the peak in 2006 to an average of $120,410 at the trough in 2009. Values haven’t risen much since. The city of San Bernardino’s property tax revenues have declined by one-sixth since 2007-08. And with unemployment skyrocketing at the same time, retail sales — never very robust in low-income communities — plummeted as well, dragging down San Bernardino’s sales tax revenues 14%.
It’s these numbers, not political chicanery or wage-and-pension rigidity, real though [sic] they may have been, that set Stockton and San Bernardino apart and that best explain what happened to them. That means any assessment of blame for their predicaments has to expand from such usual suspects as greedy public employees to include banks that flooded these cities with subprime mortgages that were resold into the high-flying securities market. It should include the huge retail corporations that have devised supply chains that employ area residents at barely livable wages.
Conventional wisdom may blame the unions and the pols. The facts tell a different story.”
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3. The reason Zakaria choose 1999 as his starting point is because many govt employers were paying NOTHING toward employee pensions…all because of the stock/internet bubble. Any increase from that level will look huge. Let’s explore reality, shall we?
Look at pages 21 and 22 of the following CalPERS presentation. You’ll quickly see why this lying sack of shit Zakaria choose 1999 as his starting point for how contribution rates have “risen” over the years. In reality, contribution rates are very much in line with historical norms. That being said, they WILL have to go higher if we use more reasonable return rate assumptions, but if we factor in the years when govt employers were paying little to NOTHING toward the pension contributions, it would still be within the normal range.
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One more thing…people keep talking about how pension costs are going up, insinuating (even claiming outright) that employees have been negotiating for, and getting, enhanced pension benefits as a result of the housing bubble. That is totally untrue. The last time there was a significant change in pension benefits was when SB400 passed in 1999 — which I have been opposed to from the very beginning.
Pension costs are going up because of the losses in the pension funds. Also, as a percentage of revenues, govt employers are paying a greater share toward pensions both because of the reduced revenues and because of the losses in the pension funds. They are not paying more because employees have been getting better pension benefits over the past decade. Pension benefits have NOT increased over the past 10+ years except for COLAs for current retirees. In many cases, since ~2008, pension benefits have been **reduced** during negotiations because of the economic crisis.
July 26, 2012 at 3:13 AM #748926ParticipantOnce again, I’ve repeatedly challenged all the anti-union types to come up with actual solutions to our problems, but nobody has stepped up to the plate. As stated before, even if we change every public employee over to a 401k-style account, it will not solve our budget problems.
Public employees aren’t any more repsonsible for the economic crisis (and the resulting “pension crisis”) than anyone else here. They should not be expected to bear the entire burden for everyone else.
Here is my proposed solution…what is yours?
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1. Roll back the pension boost enacted by Gray Davis (and friends) from 3% @XX to 2% @ 55 (going forward) for public safety workers. I’m an ardent supporter of defined-benefit pension plans, but this increase was totally irresponsible, and I said so back then. Because this increase has been there for so long, and because many older workers have adjusted their finances because of it, those with 10 years or less left before retirement will need a lump sum payment, perhaps of $50K-$150K, basically something tied to the number of years they’ve already put in under the 3% formula (a drop in the bucket when compared to the relative savings) in order to make up for the fact that they are too close to retirement to make up the difference.
2. Cut pay of municipal and state workers by ~10%, if they haven’t already been cut (many have).
3. Get serious about illegal immigration, and either demand that the federal government supports all of the illegals and their children, OR charge the employers of illegal immigrants for **every single benefit** used by their workers AND their dependents (legal or not), and include infrastrucuture expenses AND the expenses related to administering this program.
[If we “fix” the illegal immigration problem, it will probably eliminate about 25-40% of the costs associated with education and prisons, and possibly “welfare” programs — all of these being the largest expenses in the state.]
What would be interesting is to see how “cheap” that illegal labor is after all the costs have been added in — these costs have been subsidized by the taxpayers. Who knows? Maybe employers would suddenly find out that Americans are “willing to do THAT work, after all” when employers are forced to pay the REAL costs of that labor.
4. Get rid of Prop 13 protection for all residences except a SINGLE, primary residence. There is NO excuse for making taxpayers subsidize landlords via cheap/under-market property taxes.
Eliminate inheritability of Prop 13 protection IF the heir intends to “step-up” the cost basis upon death of a parent.
5. Get rid of Prop 13 protection for all commercial properties except for a SINGLE property (held by an individual or a trust/LLC controlled by that person). Eliminate the ability to pass Prop 13 protection from seller to buyer via corporate/LLC loopholes.
Once those things are done, see where everything stands, and then raise certain taxes, if necessary. I have a feeling we’d end up with a surplus if we enacted the changes noted above, though.
July 26, 2012 at 3:52 AM #748927ParticipantAnd finally…a level-headed blog post written in 2010 from the (now former) mayor of Ventura:
http://fulton4ventura.blogspot.com/2010/10/why-we-have-to-make-tough-choices-on.html
July 26, 2012 at 7:16 AM #748930desmond
ParticipantHoly crap, go get some sleep.
July 26, 2012 at 8:17 AM #748931ParticipantIt’s not revenue drops.
San Bernardino’s total revenue is down 11.2% from peak.
That’s all. The property tax drop, sales tax drop, VLF transfer etc, UUT, etc are down a total of about $11 million.
They have not lost half of their property tax base.
July 26, 2012 at 9:36 AM #748939GuestCA renter, your solutions won’t work. They are all conditional on each other and that’s not how the real world works.
In the real world, you get what you can.
If nothing is done, municipalities will go into bankruptcy one after another. That could be the best solution of all.
The response to the financial crisis is the same. If Congress won’t act, the Federal Reserve must step in.
July 26, 2012 at 3:09 PM #748936sdrealtor
Participant“Many cities greatly expanded their budgets for capital projects during the bubble. Many of these projects were unnecessary and over-the-top “monuments” on which politicians could place their names for all to see.”
Do you mean like these?
http://piggington.com/public_sector_porn
“That means any assessment of blame for their predicaments has to expand from such usual suspects as greedy public employees to include banks that flooded these cities with subprime mortgages that were resold into the high-flying securities market.”
You will note that the passage she quoted EXPANDS the blame to include others it does not exonerate the “usual suspects as greedy public employees “.
In the private sector we have a remedy for entities whose expenses (including payroll) are out of line with revenue (no matter what the cause of it)- layoffs, pay cuts, massive restructuring, bankruptcy and whatever is necessary to bring things back into line. Its coming to the public sector soon……
July 26, 2012 at 4:19 PM #748981Participant[quote=briansd1]CA renter, your solutions won’t work. They are all conditional on each other and that’s not how the real world works.
In the real world, you get what you can.
If nothing is done, municipalities will go into bankruptcy one after another. That could be the best solution of all.
The response to the financial crisis is the same. If Congress won’t act, the Federal Reserve must step in.[/quote]
That’s a teriffic load of BS, brian, and you know it. The changes I mentioned would be reasonable and legal (unlike trying to take away vested benefits from employees who *earned* them, and who did NOT cause the financial crisis).
It’s funny how you claim that the people who caused the crisis should not be held to account, while cheering on the attacks on innocent people who simply chose careers with more stability.
1. Make those who are responsible for the crisis take the first loss.
2. Enact what I proposed above.
3. THEN, you can talk about stipping away vested benefits, if that’s even necessary (and I doubt it would be necessary, in many cases).
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