OT: Estimated state budget deficit reaches $25.4 billion

[CA renter]

[quote=pri_dk]Thanks OC, you are clearly an expert and you’ll be the first person I call if I ever need a bankruptcy attorney.

[quote=flu]Yes, yes. I’m familiar with the CURRENT rules regarding only municipalities’ ability to file for the BK…BUT do you folks really believe that rules aren’t going to change?[/quote]

So the federal government will change the laws in order to allow CA to declare bankruptcy?

Anyway, this is just semantics and legal technicalities. The interesting question is the impact on government function when the state simply cannot borrow more money. The state constitution requires that schools get get priority followed by general-obligation bondholders. So the state is very unlikely to default, since it is required to cut just about everything else before skipping an interest payment.

But I do agree that things will be different.

A few years down the road, when there is simply no money to pay the unsustainable pension obligations, the unions will start filing the lawsuits. They will claim that contract law supersedes the state constitution, and that funding should be taken from schools to pay for their posh retirement lifestyles. It won’t be technically be bankruptcy, but it will be a huge legal mess.[/quote]

Will have to double-check, but believe the pensions are #2, behind G.O. bonds.

edit: It does look like education takes precedence over pensions according to this:

But our main concern, this year as last year, is to explain very clearly that the state is not “running out of cash” or “short of cash” when it comes to the funds available for debt service. The constitutionally-mandated financial cushion that carves out top priorities for education and debt service lets investors sleep at night, even if the “headline risk” would suggest otherwise. Understanding this “cushion” is especially important at a time when the state’s credit ratings are at triple-B levels. Some “conservative” investors, if they go by credit ratings alone, will avoid purchasing California’s bonds. That decision carries with it a major trade-off for an income-oriented investor. You are leaving money on the table because the state’s G.O. bonds are paying a hefty premium over what you will receive on higher-rated municipal debt.

http://www.californiabondadvisor.com/Controller0310.htm

…but I have also heard that pension obligations have priority. Will have to do more checking.

Nonetheless, the pensions alone are not the problem. As davelj correctly pointed out, much of our governmental structure is very, very top-heavy. We need to shed the costs there, as well as eliminate all the expenses related to illegal immigration FIRST, before touching the existing pension obligations (please note that I’m NOT saying we shouldn’t look into pension reform, just that we need to eliminate the costs that we should never have taken on in the first place). We can’t really know what we’re working with until we get rid of the fat that is truly unproductive and negatively affects our budget and quality of life in California.

[Anonymous]

[quote=CA renter]we need to eliminate the costs that we should never have taken on in the first place).
[/quote]

Which is exactly why pensions must be first on the chopping block. We should have never taken out that cost in the first place.

[quote] We can’t really know what we’re working with until we get rid of the fat that is truly unproductive and negatively affects our budget and quality of life in California.[/quote]

Everybody wants to fix the problem until it impacts their quality of life.

The numbers are staggering:

http://www.investmentnews.com/article/20101019/FREE/101019894

To keep their promises to retirees, the California Public Employees Retirement System, the biggest plan, the California State Teachers Retirement System, the second-largest, and the University of California Retirement System may have combined liabilities of more than 5.5 times the state’s annual tax revenue by fiscal 2012

Here’s what that means: If CA is to catch up on its pension liabilities we would have do the equivalent of shutting down *everything* for more than five years. No schools, no CHP, no roads, nothing. For five years.

How’s that gonna affect our quality of life?

Sure we can spread that pain over more time, but it’s going to be a lot of pain, for a long time.

Sorry, but by no rational estimate could illegal immigration cost the state that much. Forget about that scapegoat.

Pension liabilities overwhelm any possible solution. Without massive pension reform there is simply no way to fix the budget short of shutting down the entire state government.

Looking for other things to cut won’t accomplish anything. Because even if we cut everything, we are still five years in the hole.

[Anonymous]

[quote=CA renter]we need to eliminate the costs that we should never have taken on in the first place).
[/quote]

Which is exactly why pensions must be first on the chopping block. We should have never taken out that cost in the first place.

[quote] We can’t really know what we’re working with until we get rid of the fat that is truly unproductive and negatively affects our budget and quality of life in California.[/quote]

Everybody wants to fix the problem until it impacts their quality of life.

The numbers are staggering:

http://www.investmentnews.com/article/20101019/FREE/101019894

To keep their promises to retirees, the California Public Employees Retirement System, the biggest plan, the California State Teachers Retirement System, the second-largest, and the University of California Retirement System may have combined liabilities of more than 5.5 times the state’s annual tax revenue by fiscal 2012

Here’s what that means: If CA is to catch up on its pension liabilities we would have do the equivalent of shutting down *everything* for more than five years. No schools, no CHP, no roads, nothing. For five years.

How’s that gonna affect our quality of life?

Sure we can spread that pain over more time, but it’s going to be a lot of pain, for a long time.

Sorry, but by no rational estimate could illegal immigration cost the state that much. Forget about that scapegoat.

Pension liabilities overwhelm any possible solution. Without massive pension reform there is simply no way to fix the budget short of shutting down the entire state government.

Looking for other things to cut won’t accomplish anything. Because even if we cut everything, we are still five years in the hole.

[Anonymous]

[quote=CA renter]we need to eliminate the costs that we should never have taken on in the first place).
[/quote]

Which is exactly why pensions must be first on the chopping block. We should have never taken out that cost in the first place.

[quote] We can’t really know what we’re working with until we get rid of the fat that is truly unproductive and negatively affects our budget and quality of life in California.[/quote]

Everybody wants to fix the problem until it impacts their quality of life.

The numbers are staggering:

http://www.investmentnews.com/article/20101019/FREE/101019894

To keep their promises to retirees, the California Public Employees Retirement System, the biggest plan, the California State Teachers Retirement System, the second-largest, and the University of California Retirement System may have combined liabilities of more than 5.5 times the state’s annual tax revenue by fiscal 2012

Here’s what that means: If CA is to catch up on its pension liabilities we would have do the equivalent of shutting down *everything* for more than five years. No schools, no CHP, no roads, nothing. For five years.

How’s that gonna affect our quality of life?

Sure we can spread that pain over more time, but it’s going to be a lot of pain, for a long time.

Sorry, but by no rational estimate could illegal immigration cost the state that much. Forget about that scapegoat.

Pension liabilities overwhelm any possible solution. Without massive pension reform there is simply no way to fix the budget short of shutting down the entire state government.

Looking for other things to cut won’t accomplish anything. Because even if we cut everything, we are still five years in the hole.

[Anonymous]

[quote=CA renter]we need to eliminate the costs that we should never have taken on in the first place).
[/quote]

Which is exactly why pensions must be first on the chopping block. We should have never taken out that cost in the first place.

[quote] We can’t really know what we’re working with until we get rid of the fat that is truly unproductive and negatively affects our budget and quality of life in California.[/quote]

Everybody wants to fix the problem until it impacts their quality of life.

The numbers are staggering:

http://www.investmentnews.com/article/20101019/FREE/101019894

To keep their promises to retirees, the California Public Employees Retirement System, the biggest plan, the California State Teachers Retirement System, the second-largest, and the University of California Retirement System may have combined liabilities of more than 5.5 times the state’s annual tax revenue by fiscal 2012

Here’s what that means: If CA is to catch up on its pension liabilities we would have do the equivalent of shutting down *everything* for more than five years. No schools, no CHP, no roads, nothing. For five years.

How’s that gonna affect our quality of life?

Sure we can spread that pain over more time, but it’s going to be a lot of pain, for a long time.

Sorry, but by no rational estimate could illegal immigration cost the state that much. Forget about that scapegoat.

Pension liabilities overwhelm any possible solution. Without massive pension reform there is simply no way to fix the budget short of shutting down the entire state government.

Looking for other things to cut won’t accomplish anything. Because even if we cut everything, we are still five years in the hole.

[Anonymous]

[quote=CA renter]we need to eliminate the costs that we should never have taken on in the first place).
[/quote]

Which is exactly why pensions must be first on the chopping block. We should have never taken out that cost in the first place.

[quote] We can’t really know what we’re working with until we get rid of the fat that is truly unproductive and negatively affects our budget and quality of life in California.[/quote]

Everybody wants to fix the problem until it impacts their quality of life.

The numbers are staggering:

http://www.investmentnews.com/article/20101019/FREE/101019894

To keep their promises to retirees, the California Public Employees Retirement System, the biggest plan, the California State Teachers Retirement System, the second-largest, and the University of California Retirement System may have combined liabilities of more than 5.5 times the state’s annual tax revenue by fiscal 2012

Here’s what that means: If CA is to catch up on its pension liabilities we would have do the equivalent of shutting down *everything* for more than five years. No schools, no CHP, no roads, nothing. For five years.

How’s that gonna affect our quality of life?

Sure we can spread that pain over more time, but it’s going to be a lot of pain, for a long time.

Sorry, but by no rational estimate could illegal immigration cost the state that much. Forget about that scapegoat.

Pension liabilities overwhelm any possible solution. Without massive pension reform there is simply no way to fix the budget short of shutting down the entire state government.

Looking for other things to cut won’t accomplish anything. Because even if we cut everything, we are still five years in the hole.

[no_such_reality]

The sad fact is that we are stuck with the retirement plans for those people close to retirement. For the others, they need to be converted to defined contribution plans.

However, all those cops and firefighters in the cities and counties that 40 years old looking at a retirement plan of 50, are going to give it up nor do I see the courts forcing them to give it up. The only option is to cash them out, which will result in such outrageous payouts that the individual members of the union are shamed into accepting something reasonable. I don’t see it happening. They have built their plans around a retirement plan and no segment of our government has the stamina to do it.

Everybody pretends it’s not the case, but history has spoken. The actuarial tables, live expectancy, and volatility in returns makes it unmanageable to make promises to pay something thirty years in the future for 20, 30 or 40 years. For the safety workers with retire at 50 plans (there are some), they are literally looking at close to 40 years of retirement benefits that are cost of living adjusted.

[no_such_reality]

The sad fact is that we are stuck with the retirement plans for those people close to retirement. For the others, they need to be converted to defined contribution plans.

However, all those cops and firefighters in the cities and counties that 40 years old looking at a retirement plan of 50, are going to give it up nor do I see the courts forcing them to give it up. The only option is to cash them out, which will result in such outrageous payouts that the individual members of the union are shamed into accepting something reasonable. I don’t see it happening. They have built their plans around a retirement plan and no segment of our government has the stamina to do it.

Everybody pretends it’s not the case, but history has spoken. The actuarial tables, live expectancy, and volatility in returns makes it unmanageable to make promises to pay something thirty years in the future for 20, 30 or 40 years. For the safety workers with retire at 50 plans (there are some), they are literally looking at close to 40 years of retirement benefits that are cost of living adjusted.

[no_such_reality]

The sad fact is that we are stuck with the retirement plans for those people close to retirement. For the others, they need to be converted to defined contribution plans.

However, all those cops and firefighters in the cities and counties that 40 years old looking at a retirement plan of 50, are going to give it up nor do I see the courts forcing them to give it up. The only option is to cash them out, which will result in such outrageous payouts that the individual members of the union are shamed into accepting something reasonable. I don’t see it happening. They have built their plans around a retirement plan and no segment of our government has the stamina to do it.

Everybody pretends it’s not the case, but history has spoken. The actuarial tables, live expectancy, and volatility in returns makes it unmanageable to make promises to pay something thirty years in the future for 20, 30 or 40 years. For the safety workers with retire at 50 plans (there are some), they are literally looking at close to 40 years of retirement benefits that are cost of living adjusted.

[no_such_reality]

The sad fact is that we are stuck with the retirement plans for those people close to retirement. For the others, they need to be converted to defined contribution plans.

However, all those cops and firefighters in the cities and counties that 40 years old looking at a retirement plan of 50, are going to give it up nor do I see the courts forcing them to give it up. The only option is to cash them out, which will result in such outrageous payouts that the individual members of the union are shamed into accepting something reasonable. I don’t see it happening. They have built their plans around a retirement plan and no segment of our government has the stamina to do it.

Everybody pretends it’s not the case, but history has spoken. The actuarial tables, live expectancy, and volatility in returns makes it unmanageable to make promises to pay something thirty years in the future for 20, 30 or 40 years. For the safety workers with retire at 50 plans (there are some), they are literally looking at close to 40 years of retirement benefits that are cost of living adjusted.

[no_such_reality]

The sad fact is that we are stuck with the retirement plans for those people close to retirement. For the others, they need to be converted to defined contribution plans.

However, all those cops and firefighters in the cities and counties that 40 years old looking at a retirement plan of 50, are going to give it up nor do I see the courts forcing them to give it up. The only option is to cash them out, which will result in such outrageous payouts that the individual members of the union are shamed into accepting something reasonable. I don’t see it happening. They have built their plans around a retirement plan and no segment of our government has the stamina to do it.

Everybody pretends it’s not the case, but history has spoken. The actuarial tables, live expectancy, and volatility in returns makes it unmanageable to make promises to pay something thirty years in the future for 20, 30 or 40 years. For the safety workers with retire at 50 plans (there are some), they are literally looking at close to 40 years of retirement benefits that are cost of living adjusted.

[jficquette]

Lay off 30% of state employees and problem solved.

[jficquette]

Lay off 30% of state employees and problem solved.

[jficquette]

Lay off 30% of state employees and problem solved.

[jficquette]

Lay off 30% of state employees and problem solved.

[Author]

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