Tuesday, June 6, 2017

Marin County grand jury explains pension crisis

This is an excellent, thorough report explaining the pension crisis facing California municipalities.  While the numbers in the report are specific to Marin, the issues are mostly identical for cities like Encinitas.

Key points:
It’s Worse than You Thought – While a net pension liability of $1 billion may be disturbing, the true economic measure of the obligation is significantly greater than this estimate.

The Thing That Ate My Budget – The annual expense of funding pensions for current and future retirees has risen sharply over the past decade and this trend will continue; for many agencies, it is likely to accelerate over the next five years. This will lead to budgetary squeezes. While virtually every public agency in Marin has unfunded pension obligations, some appear to have adequate resources to meet them, while many do not. We will look at what agencies are currently doing to address the issues and what additional steps they should take.

The Exit Doors are Locked – Although there are no easy solutions, one way to reduce and eliminate unfunded pension liabilities in future years would be transitioning from the current system of defined benefit pension plans to defined contribution pension plans, similar to a 401(k). However, this approach is largely precluded by existing statutes and made impractical by the imposition of termination fees by the pension funds that manage public agency retirement assets. [This last part is a new twist; San Diego has successfully transitioned to a defined contribution plan, but San Diego does not use CalPERS. The grand jury says that CalPERS has veto power over allowing defined contribution plans for new employees of any agency that uses CalPERS, and the CalPERS board would be likely to use that veto. CalPERS is like the Roach Motel -- cities check in, but they don't check out! Governor Brown proposed legislation that would have changed this, but it was killed in the union-dominated legislature].

22 comments:

  1. Will the last income tax paying citizen leaving California turn off the lights....
    The non-income tax paying citizens.....

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  2. CalPERS is necessary for our retired civil servants. How else are they going to afford Winnebagos and Fleetwoods?

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  3. Too afford the shortfall, the state legislature should pass a bill to tax PERS pensions 50% for any amount over $70k a year and have the tax earmarked as PERS revenue to help lower tax payers costs.

    An example would be Muir pulls in $180k per year. First 70k no special tax. Next $110k taxed at 50% or $55k in taxes go BACK to PERS. MUIR would still get $125k a year and PERS would get 55K back per year.

    Seems like a fair and simple fix.

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    1. Public pension is separate from social security. They don't pay into that. I think there is a bigger problem in social security funding.

      Why aren't you talking about that too?

      The failures of both together is mindboggling and will upend what we know as the American economy, just like the bank crash and bail out of 2007/2008.

      First we have to get through failed trump economics and burst of bitcoin bubble (25 dip - soon).

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    2. 10:01

      Corrupt, crooked, crony politicians in bed with unions have looted taxpayers. Hillary Clinton, Paul Ryan, John McCain, jerry Brown, Arnold Schwarzenegger have passed these failing policies. President Trump had nothing to do with them. MAGA. On another note, Ben Carson found nearly $ 1 billion in waste at HUD, that is for all of us.

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    3. The 3,000 point swing had everything to do with upside of trump.

      Soon we see downside because nothing is getting done.

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    4. Social Security for retirees is not near the huge amount paid out to "public servants."

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  4. The most interesting note about this blog posting is that no one in this 2 bit town gives a damn that pensions will destroy the city financially, yet a simple story about roundabouts generates comment after comment, no matter how silly and stupid they might be.

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    1. The three people who commented above 7:18 care, I care and since the pension post was yesterday, my guess is others who care will post.

      The pension debt and successive councils' spendthrift ways are why staff and council are for limitless development and letting alcohol sales saturate the city.

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    2. Encinitas would go stale without new development and drinks. You need to progress with society and live a little.

      Pensions aren't the issue. Staff's salaries are.

      If they were getting paid normal salaries then we wouldn't be here, would we? Do we need an executive team that each makes $150 k plus a year? If it was reduced by ten percent, would we get less talent?

      We can't fix pension problems, but we can fix salaries.

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    3. 10:05 continued... oh yes, and no new promotions.

      New outside employees under new PERS formula. This will help, dramatically. Existing employees can move to another city to get job promotions.

      Also, instead of salary increases, 1 percent here and 1 percent here, can we just offer a separate stipend that doesn't involve calpers?

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    4. 10:05 Note that 8:54 said "limitless development and letting alcohol sales saturate the city."

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    5. I think 10:05 typed it correctly. And I agree with him/her.

      There is no benefit to staying the same.

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  5. If you read the report, it's far more dismal than is presented on the opening of this blog. Bottom line is this, Calpers runs border town. Best thing to do is sell everything and leave the state. Yup, take the money and run. Run run run. Run hard and fast as far away from California as you can get. Stay at your own risk. ( is it legal to tax people more than they earn ?? I don't mean to simply raise their taxes I'm talking about telling them you owe 110 or 120% of your income..). Is that legal??

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  6. Great little report. Sounds like the starting point for pension reform in that County. I hope our City Council members read the report and understand what impacts any raise's to our City employee's will due to the future operating budgets.

    I wish TBH and CB would highlight the pension issues in their little emails rather than state how we live in a wealthy area and our budget looks amazing. Don't really know Joe since he was assigned to the City council, under shady circumstances. Muir is biased and Tony....does he even understand the issue. I wrote him a letter and he doesn't even have the decency to respond to his constituent.

    Cheers everybody! I should have gone and worked for the City years ago, would have guaranteed a great retirement.

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    1. What's with "raise's" and "employee's"?

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    2. Good comments, 4:28.

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  7. The City Council should start a county wide coalition to get a State Bill Sponsored to tax the excessive pensions over $50k per year and restrict the tax revenue raised to the PERS fund to cover the DEBT.

    Its a way to have excess abusers like Muir and the other cats pay their fair share and bring things back down to reality.

    Currently Muir and other cats are robbing the taxpayers of millions every month.

    Thanks Jerome for catering to unions and destroying Encinitas's financial future with your crony vote in 2005 for your buddy Muir. Pathetic. Do you still show your face in Encinitas or did you move to Oside with your boy toy Mikey?

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    1. Was Jerome king then? Did he decree the 35% pension increase himself?

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    2. Your idea and suggestion is not only pathetic and illogical, but very misleading! If it's such a good idea (even if it's illegal), why don't you bring it the council? Maybe because it's stupid!

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  8. Too funny 8:47,

    Sounds like some retired fat cat is a bit nervous about contributing to the solution. I agree with 6:00am and hope City Council will bring this up at a Sandag meeting or California Leaque of City's meeting to solve the pension crisis.

    It is clearly not against the law if the create the law in the Legislator.

    Its the path forward.

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  9. Getting our council to ask anything from SANDOG is not going to happen, but damn well should, especially since their tax plan failed miserably at the last election. Kick that DOG while they are down and demand from them what this community really needs.

    Move some of the 5 widening funds to help us lower the tracks. There is no better time while they are reeling from that failed tax plan. Either that, or drop out. Grow some cajones and demand what this community needs most from SANDOG.

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