Bailouts for CA pensions next up
I knew this was coming. You could see the writing on the wall 3 years ago or more. So we the taxpayers bail out the banks and Wall St. Then we bail out AIG. Now we are going to have to bail out the pension funds of those hard working cops who bring lawsuits upon us taxpayers (when the shoot and taser people "accidentally") as well as all their "hard working" civil servant cousins. Yes that's right Joe Taxpayer. You go to end of the line. Too bad your 401k just ate it in the last two weeks. No one to bail you out. But who will pay the cops $100,000 a year retirement and gold plated healthcare for life with cost of living when Wall St. dented their pension funds? YOU WILL of course. Wake up private sector zombies! You better get in line for your bailout before its all gone! You know what rolls down hill...and guess who is at the bottom. You cant really have a bigger train wreck can you? Idiots in government running a pension fund the size of a small country and when they screw up they get bailed out.
Like I say all the time. The solution to the problem is that we all go work for the government and leave the private sector jobs to third world (soon to be first world) countries. Next we will nationalize the banks. Ahh socialism is great ain't it? Well it is if you are a public employee. The rest of us have to pay for it.
Retirement system bailout feared
By Troy Anderson, Staff Writer
Article Launched: 10/08/2008
http://www.dailybreeze.com/ci_10674612
The Wall Street meltdown has siphoned tens of billions of dollars from local and state public pension systems over the past year, and elected officials and taxpayer groups expressed worry Wednesday that taxpayers might ultimately have to bail out the plans.
The state retirement system has lost about $50 billion in investment value since June 30, 2007, a drop of about 20 percent in just over a year.
Los Angeles County's system has dropped 8 percent, from $40.9 billion down to $37.8 billion, during the same period.
The city of Los Angeles Fire and Police Pension System dropped 13 percent, to $12.1 billion.
And the state teachers retirement system has also dropped 8 percent, down to $158.6 billion.
Former Assemblyman Keith Richman, who heads a foundation seeking pension reform in California, said the drop in assets "is going to put a severe financial strain on the taxpayers."
He noted that state taxpayers already are on the hook for several hundred billion dollars in unfunded liabilities for public employee pensions and retiree health care plans.
"The public employee pensions were going to place a heavy cost on the taxpayers before the drop in the stock market and it's going to be even more costly now," said Richman, president of the California Foundation for Fiscal Responsibility.
Jon Coupal, president of the Howard Jarvis Taxpayers Association, said the drops in the funds, especially the $49.2 billion drop in CalPERS, are "Exhibit A" in why state lawmakers should have adopted Richman's plan a few years ago to shift new state employees into 401(k)-type retirement plans.
"So not only do private employees see their own 401(k) retirement accounts shrinking, they are now also on the hook to pay additional costs for public sector pensions that are unfunded," Coupal said. "This is highly unjust."
But California Public Employees Retirement System spokeswoman Patricia Macht said the system has experienced heavy losses before, only to recover fairly quickly. After the Sept. 11, 2001, terrorist attacks, the fund lost about $50 billion but ultimately rebounded with a $120 billion gain, she said.
CalPERS holds about 56 percent of its investment portfolio in the stock market, she said, but no more than 0.5 percent of that in any single public company, with additional diverse investment in bonds, real estate and commodities.
"One lesson we learned in the early 2000s was the need to hold back some of our gains - to spread our gains over a longer period of a time," she said.
Macht said the taxpayer contribution to CalPERS won't need to be increased in the fiscal year starting July 1. But she said CalPERS will have to wait to see how the market does before determining if the taxpayer contribution will need to be increased in future years.
Les Robbins, chairman of the Los Angeles County Employees Retirement Association, said the board has plenty of money to pay for county employees' pensions.
"We haven't seen anything like this since 1929," said Robbins, a retired sheriff's sergeant. [is this not inconsistent with his prior statement...never mind he is a cop already on the dole...LAAG Editor] "But we're in this for the long haul. We work in 30-year cycles. We are a conservative fund." [Yes and so were my 401k stocks..again public employees in denial of reality]
Michael Perez, general manager of the city's Fire and Police Pension, said the fund has dropped significantly and he's gotten lots of calls from worried members.
"It's affected us as it has every other public pension system," Perez said. "We're a well-funded and well-diversified plan and we smooth asset values over a five-year period. We've been in existence since 1899 and have been through a lot of market cycles."
At Tuesday's Board of Supervisors meeting, Supervisor Zev Yaroslavsky expressed concerns about a recent LACERA report noting the fund has exposure to several large investment banks that filed for bankruptcy, received a federal bailout or were purchased by another bank, including Lehman Brothers Holdings Inc., American International Group Inc. and Merrill Lynch Co. Inc.
LACERA Chief Investment Officer Lisa Mazzocco wrote that the fund has more than $150 million invested in companies that could be at risk.
"The magnitude of this week's events is incomprehensible," Mazzocco wrote. "In a matter of 10 short days, the country's financial system has been dramatically altered."
Supervisor Yvonne Brathwaite Burke said LACERA had initially estimated it may lose $84 million.
"We had a lot of warning," Burke said. "And so I was really surprised that there was such a difference in terms of the approach of the county and the approach of LACERA as it related to some of those investments."
But Yaroslavsky said the $84million is "pocket change" compared to what the losses may eventually total. Yaroslavsky said the county may ultimately have to bolster the LACERA fund with hundreds of millions of dollars.
The annual taxpayer contribution to the fund has risen from $194million in 2001 to $752 million last year.
"The real impact is going to be when we have to make up what could be in the nine figures on the retirement contribution - to make up the difference between what they lost in earnings and what has to be put in to meet the requirements of funding the pension plan," Yaroslavsky said.
troy.anderson@dailynews.com
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