Not just in LA or Ca anymore..its all over

Sooner or later the voters/taxpayers will wake up. But it will likely be too late. The taxpayers need to take on the government workers and the unions as the politicians sure as hell are not going to do it.

Why L.A. is going broke
City worker costs up 7.5% a year, but revenue up just 5.7%
By Beth Barrett, Staff Writer
Article Last Updated: 11/18/2007 12:52:27 AM PST
http://www.dailynews.com/news/ci_7494599

Online Poll
Do you think city workers are overpaid?
Yes 72.5 %
No 27.50 %

Salaries, pensions and benefits for Los Angeles city workers have soared in the past seven years, outstripping revenue growth and pushing the city toward a serious budget crisis, according to a Daily News study.

Since 2000, Los Angeles workers' costs have surged 53 percent - to $4 billion a year - rising an average 7.5 percent every year.

General fund revenues also grew strongly but only at an average 5.7 percent a year.

The result is a swing of almost $1 billion, pushing the city from a surplus to an anticipated shortfall of $300 million next year.

"It's almost like we're working for them; they aren't there to serve us. The situation has gotten badly out of whack," said Jack Kyser, chief economist for the nonprofit Los Angeles County Economic Development Corp.

Why the large gap between employee costs and revenue growth? It's the power of city employee unions to get politicians elected to office, said Alice Rivlin, a former director of the Congressional Budget Office and now a senior fellow at Brookings Institution, a highly respected think tank based in Washington, D.C.

"It's very hard politically for mayors or city councils to go against (unions)," Rivlin said. "They can turn out the votes and turn out the lights."

One example of city employee unions' clout in Los Angeles is the recently negotiated contract covering most city workers - except police and firefighters, who usually do as well as or better than
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other municipal workers.

The contract - which comes at a time when when revenue growth is expected to fall sharply - provides 23 percent wage increases over the next five years. Those increases come on top of regular "step" increases that can add as much as 5.5 percent a year to workers' pay.

The new contract attempts to contain health-care costs long term, but comes after pension costs have skyrocketed 231 percent.

As the city races to keep up with worker costs, its $7 billion budget - including the general fund - gets balanced because of reductions elsewhere. Liability claims, for instance, have declined 11.4 percent this decade.

City Administrative Officer Karen Sisson said officials are now taking a longer view to address the gap as the housing downturn is predicted to slow revenue growth to just 1.3 percent next year.

Sisson said a central element will be working with unions to boost employee productivity - including offering cash incentives in the latest contract - without cutting services to the public.

"Part of that process is to work with the city to make it more efficient and innovative," Barbara Maynard, spokeswoman for the Coalition of L.A. Unions, said of the city unions' recent contract deal.

And that includes trying to reduce costs of health care, which the unions think is the primary driver behind escalating city expenses.

"It's in everyone's best interest to lower insurance costs," Maynard said.

Mayor Antonio Villaraigosa has ordered general managers of all departments to absorb cost-of-living increases but not cut services. He also has asked them to submit budget proposals that contain their plans if faced with cuts of as much as 8 percent.

The city is using a recently approved trash-fee hike to pay for new police officers, and it is putting $16 million more into new police facilities, increasing firefighter-recruit training, continuing extended library hours, and increasing the number of homeless shelters.

About 4,000 of the city's nearly 40,000 positions are unfilled and could stay that way. At the same time, the city is grappling with the potential loss of a telephone-users tax that could sap $270 million a year from the budget.

Two courts already have found that changes in the tax three years ago made it illegal. In anticipation of a definitive ruling next year, Villaraigosa and the City Council last month declared a fiscal emergency and put a new phone tax on the February presidential-primary ballot, where it will need only a simple majority to pass instead of the two-thirds required for nonemergency measures.

"With the crisis in the housing market and other developments in the economy, we can no longer expect to get unanticipated revenue at the end of the year, which means we must budget very, very closely," Sisson said.

"We're going to be forced to continue to deliver services with fewer resources than we've had historically."

City Controller Laura Chick, the watchdog on city spending, warned the city is adopting a crisis mode that will hamstring general managers' creativity.

"What we never do is figure out that if we're increasing the cost of delivering services, where are we getting comparable revenue? How are we delivering services more efficiently and effectively?

"What the city does in a reactionary way to these crises ... (is) we stop hiring, let positions go vacant. We run on a crisis/emergency budget where we slash and burn wherever it's doable - and not necessarily in a strategic way.

"It's a bad situation."

The fact that the city's elected officials are the highest paid in the nation has been a particularly sore point. In the past two years, the mayor, City Attorney Rocky Delgadillo, Chick and council members have seen their paychecks increase 20 percent.

The policy that ties their wages to judges' salaries means they get a 4.16 percent raise retroactive to July1, the fourth boost since early last year.

Meanwhile, workers' compensation also has jumped - from $100 million to $127 million. And the recent deal for workers without police or firefighter status will cost taxpayers more than $200 million. While most of these employees' last contract was for a 6.25 percent pay raise over three years - no raise the first year, 2 percent the second and 4.25 percent the third - their average raises were about 7.7 percent with the step increases factored in.

Maynard said that while some employees got the step increases, others reported they still couldn't keep up with rising costs in Los Angeles.

"Back in the good old days, there was a trade-off: If you worked in government, you didn't get what the private sector did, but you had security and good benefits, and that seems to be tossed on its side," Kyser said.

But Sisson said city officials are now working differently with unions.

The new contract says that if workers can find $25 million in sustainable, verifiable savings, they will get an equal payment in "flex dollars" in the last year of the contract to buy additional benefits or take in cash.

Sisson said the five-year contract provides budget stability. And she said that with six unions participating, it has resulted in standardization of bonuses and other financial items.

It also delays by six months when most new employees get their first 5.5 percent step increase in pay, which amounts to a $4 million to $6 million annual saving.

Sisson said that with stagnant revenues, the city is facing a tough situation. But, she said, it's manageable.

"'Crisis,' to me, implies that you haven't thought about it and you don't know how to get out of it," she said.

"And I think we have thought about it, and we have planned for it, so in that sense, it's not a crisis."


Lakewood Accountability Action Group™ LAAG | www.LAAG.us | Lakewood, CA
A California Non Profit Association | Demanding action and accountability from local government™

The Party's Over Folks

Unless you have been living in a cave over the last month you know we are headed for both inflation AND a recession. This was likely triggered by the sub prime mortgage melt down. Of course it does not help that the dollar is tanking, oil is rising to counteract the falling dollar and China realizes they are holding half of the debt of the entire US. But this is no worry for Government employees. Full speed ahead on the Titanic. Poblem is that when the Titanic goes down only Govt. employees will get lifeboats. Taxpayers will have to go down with the ship. Like the article says below, the slow people, those that only Oprah or entertainment TV (the lowest denominator voter) is starting to at least as questions about the pension issue.

Sutter debates public pensions Its controversial move to boost its benefits echoes statewide fight

By John Hill, Sacramento Bee, September 3, 2007

Sutter County may be a little off the beaten track, but it finds itself at the center of a statewide debate over whether local governments have granted extravagant pensions to public employees.

Three years ago, the Sutter County Board of Supervisors sweetened pensions for county workers, arguing that generous retirements would help the county recruit and retain workers.

The move was controversial from the start, with one prominent local official, Auditor-Controller Robert Stark, objecting that he and the public were given no chance to comment on the dramatic change.

Three years later — this June — the county grand jury called the decision "flawed" and laid out the fiscal consequences. The county’s pension plan had gone from being $38 million in the black in 2000 to $36 million in the red five years later.

"This has gone on all over," said Keith Richman, a former assemblyman behind a proposed initiative to scale back government pension costs by offering a less generous retirement to new state and local employees.

Organizers have not yet started gathering signatures for the initiative, which they hope to put on the November 2008 ballot.

"The fundamental problem is that more and more of government budgets are going to pay for retirement costs, whether you’re talking about the state or local governments," Richman said. "The money is not going to pay for other services like education or health care or public safety."

Public-employee unions counter that the state retirement system is sound, and that if the state and local governments roll back pensions, they will have to compensate by increasing salaries.

Sutter County officials defend their 2004 decision as a sensible way to maintain a qualified work force. They deny that it plunged county finances into a crisis.

"Our pensions are in great shape," said Larry Munger, a lifelong Sutter County resident who ran a market for 22 years and became a county supervisor in 1995.

Munger said he is not worried about the $36 million "unfunded liability" mentioned in the grand jury report.

"You buy a house, you’ve got an unfunded liability," he said.

The controversy, he said, has been kept alive by malcontents who have other bones to pick with the county. Munger said his constituents aren’t worried about pensions but are "sick and tired" of the critics.

Government pensions became a hot topic across California four years ago as state and local governments struggled to meet pension obligations in the midst of a fiscal crisis. The state and many local governments boosted pension benefits during the dot-com boom, when investment returns soared for the California Public Employees’ Retirement System.

Then the stock market tanked, even as the richer benefits kicked in.

In 2005, public-employee unions fought off Richman’s earlier attempt to cut costs by replacing the traditional pension system, which guarantees a set retirement income, with 401(k)- style accounts for new workers. Gov. Arnold Schwarzenegger scrapped the initiative after the unions waged a campaign saying it would cut off death and disability benefits for fallen peace officers.

Late last year, Schwarzenegger formed a 12-member commission to come up with a new proposal for dealing with pension costs. The commission is scheduled to issue its report by the end of the year.

In the meantime, local governments across the state have continued to struggle with pension costs. County grand juries and others have criticized the generosity of the benefits and how decisions were made.

Sutter County, Sacramento’s neighbor to the north and home to some 91,000 residents, increased pension benefits in 2004, after the pinch had already been felt in other jurisdictions.

Government pensions are based on a percentage of a worker’s highest annual salary multiplied by the number of years served.

In January 2004, the Board of Supervisors agreed to give rank-and-file county workers 2.7 percent of highest annual salary for each year on the job at the age of 55. That was a substantial increase from 2 percent. That August, safety employees got 3 percent at age 50.

The grand jury report faulted the Board of Supervisors for failing to consult with Stark, the auditor-controller, as required by its own rules.

Citizens got to comment only after the pension hike was a "done deal," the report concluded.

Some of the biggest beneficiaries were in upper management, the same officials who negotiated the deal, the grand jury found.

"The grand jury is not implying that these changes were engineered to primarily benefit those responsible for making them," the report states. "However, if that was their intent, they could not have designed a better process for leaving that impression."

Even though the pension hikes were meant to recruit and retain a county work force, critics say, just the opposite has happened, as workers with richer retirement prospects have headed for the door.

"I defy you to find any pension expert who says that allowing people to retire younger with more money encourages them to stay," Stark said.

The pension payments, meanwhile, take away from other pressing needs, critics say. Busy roads have not been resurfaced for years, said Wade Arnold, who describes himself as a "concerned citizen." The museum and the arts council have seen their budgets cut, he said.

The county’s backlog on maintaining roads is about $50 million, said Robert Mackensen, president of the Sutter County Taxpayers Association.

But Supervisor Jim Whiteaker said the critics are crying wolf.

"We’re very frugal and very conservative in allocating money, and we thought it was justified for our employees," he said.

Since the change, Whiteaker said, the county has filled 19 deputy sheriff positions that had been vacant.

Supervisor Munger dismissed the complaint that the public didn’t have a say. The pension concessions were made in contract negotiations with public employee unions, he said, and those meetings are never open to the public.

But critics say that the public is angry. Mackensen, of the taxpayers association, said he gets stopped on the street or the grocery store and told to keep up the good work.

The pensions can’t be rolled back without approval from public-employee unions. But they can be changed for newly hired workers.

"I think there’s hope because I think the public is waking up," Stark said. "This issue has been in the public’s eye for three years now up here, and that’s practically unheard of for something that for many people is an esoteric thing."


Lakewood Accountability Action Group™ LAAG | www.LAAG.us | Lakewood, CA
A California Non Profit Association | Demanding action and accountability from local government™

"We want what they have..."

This article is a follow up to this prior article

The firefighters make a good point. We want to get paid what all other public employees get paid as far as pensions. What they fail to point out is that this is the basis of the problem we are in today. Each govt. employee just keeps pointing to the next higher salary at another city and starts a bidding war. A bidding war not using private dollars of companies but taxpayer dollars taken from private employees paychecks.

Govt. employees salaries and pensions have no corollary in the private sector. Maybe they did at one point in time but no longer. With the demise of unions in the private sector and the opposing rise of public employees unions, the disparate result in pensions is staggering. The other problem of course is that politicians who set these salaries, pensions and benefits (dont forget the generous life time healthcare) are spineless wimps who only want to get re-elected and are glad to sell voters down the river and saddle them with huge tax liabilities in the future to fund these giveaways which will only increase as time goes on. The public employee unions are also shrewd politicos themselves, as Arnold Schwarzenegger found out two years ago. Quite frankly its easier to do a snow job on the sucker taxpayer/voters as most are asleep at the switch. Most of these pension and salary giveaways are claimed to be public but in reality are cloaked in secrecy.

Government employees fail to realize that its called "public service" for a reason. Now it has become the new ruling elite. The employer of last resort is now offers the most sought after union jobs in the country. Meanwhile the private sectors wages, benefits and pensions has been ravaged by the Bush tax policies and years of mergers and corporate raiding by venture capitalists. Govt. employees also fail to realize that all their pensions and benefits come from the taxpayers and are guaranteed against all market risks by the taxpayers (unlike in the private sector) Everything in govt. work is guaranteed in a sense. In the private sector if a business fails or fails to gain marketshare or sales the salaries and pensions fail as well. Not so in govt. There is no shrinking or "rightsizing" in govt. Only growth and only increases of everything all the time year after year.

So here is the real question. Do we bring public pensions and benefits in line with the private sector or do we try yo bring the private sector up to the govt. level and usher in full blown socialism?

Guest Commentary: Firefighters just want same treatment
By RED BLUFF FIREFIGHTERS- Special to the DN
Article Last Updated: 10/27/2007 08:28:08 AM PDT

For three years, the only statements from city representatives simply included, "it is not a financial issue, but a philosophical issue" and "The City Council is not interested." The firefighters now finally have some new information for the first time in three years with the City Council's media release. The City Council states that they do not negotiate in the press, but with their document they are, in fact, doing so by implying that an agreement may be reached if the retirement issue is set aside by the Union. The Red Bluff Firefighters Association is not a "Union," and it is simply the nine full time personnel assembled as a bargaining unit. There are no ties to organized labor.

After more than three years of patience, the Red Bluff Firefighters have found that there was no interest by the City Council for fair treatment. With no other alternative, and with overwhelming public encouragement, a petition was developed. A salary survey which was confirmed by the Human Resources Department of the City of Red Bluff using cities confirmed by the Council's consultant, Koff and Associates, and a salary survey conducted by the City of Oroville, both of which were available in the stacks of information at the petition signing sites and which are also posted on our Web site. In addition, the check stubs of a top step fire captain, the position listed on the salary surveys, were and still are available for review, simply contact Larry Snell.

1. Top step captain hourly rate is $17.73 which matches the City of Red Bluff's 7/1/07 salary schedule available at City Hall. As with other departments our size, the City of Red Bluff regularly calls its firefighters back for training and emergency calls. Your firefighters invest many more hours than most other professionals do.

2. In 2002, the firefighters and the City Council reached an agreement on a new work schedule that greatly enhanced our service to the community, and placed us on 24-hour shifts which equaled an instant 40 percent increase in work hours. Previous to this, the firefighters worked a standard 40-hour work week as most people do. It is interesting to note, that although our work hours increased by 40 percent, as a group, we are barely a few percentage points ahead of other bargaining units that did not increase their work hours at all. Therefore, we feel that it is unfair that the City Council states that the firefighters earned the highest salary increases, which completely ignores the notable increase in work hours.

3. Contrary to what the City Council may have implied, the firefighters are not the only group whose retirement is paid in full. In fact, every city employee enjoys this benefit. We are curious why the City Council seems to imply that this is exclusive to the firefighters.

4. PERS retirement schedules and service credits are similar for all city employees and approved by City Council action. The retirement contract is between the state CALPERS system and the City of Red Bluff, not the employees.

5. The City Council already approved and awarded this option of 3 percent at 50 retirement to approximately 30 police officers. Nine firefighters simply request the same option. The vast majority of fire departments on the city's survey list already provide this benefit to their personnel.

6. The police had the same retirement plan as the firefighters have now (2 percent at 50). The City Council awarded the police this exact same increased 3 percent at 50 retirement.

7. The City Council would like you to believe that the 3 percent at 50 retirement plan that we are asking for costs $190,000 per firefighter to obtain. The City Council neglected to share the 30-year time frame in their media release. The City Council also states that it will have to incur debt to finance this retirement proposal. First, the cost of the 3 percent at 50 plan is roughly $6,000 per firefighter per year, plain and simple. Why does the City Council object to this plan for nine firefighters when 30 police officers were awarded this same package several years ago? We are only asking for the same benefit that has already been granted to our hard-working police officers, nothing more.

8. The firefighters had no choice, but to reject the poor offers provided recently by the City Council. Cost of living increases of each year were not even adequately covered by these proposals and the City Council completely ignored the issue of the salary disparity between ours and other like fire departments.

Improved health insurance? The firefighters simply wish to obtain the same less expensive health insurance already awarded to the police. This less expensive insurance is simply a cheaper premium that would save the firefighters at least $400 a month in out of pocket expense. This costs the city nothing more and we ask why they have refused this.

The City Council states, "While our hearts may want to reach an agreement with this group of dedicated and valuable employees, our heads and sound judgment do not see this as a financially sound course of action." If that is the case, were they not using their heads or using financially sound judgment when the City Council awarded, by vote, the very same retirement and cheaper health insurance to the Red Bluff Police?

The firefighters are taxpayers also and appreciate sound management practices, in fact, the firefighters take great pride in, and care for millions of dollars of fire related equipment and buildings.

Contrary to what the City Council may imply, the firefighters have maintained an open mind about negotiations. The fact still remains, however, that the firefighter's salary is 40 percent below average, as confirmed by the City's Human Resources Department, using the comparable cities developed by the City Council's own consulting firm, Koff and Associates. The firefighters did not compile the cities used. The City Council also awarded 30 police officers the exact same less expensive health insurance and the exact same 3 percent at 50 retirement that the firefighters seek.

Your firefighters still simply wish to be treated fairly.

The Red Bluff Firefighters are: "A" crew: Domenic Catona, captain; Dave Carr, engineer; Matthew Shobash, engineer; "B" crew: Larry Snell, captain; Fred Agundes, engineer, John Campbell, engineer, "C" crew: Vern Raglin, captain, Brian Smalley, engineer, Jimmy Heinle, engineer.

Lakewood Accountability Action Group™ LAAG | www.LAAG.us | Lakewood, CA
A California Non Profit Association | Demanding action and accountability from local government™

Who's bluffing in Red Bluff?

This is going on all over the country. Wake up you stupid taxpayers before your future is mortgaged. Your retirement will be taken to pay for these guys. It used to be thieves used guns. Now they use public employee unions. At least this city council has the guts to at least tell the taxpayers that the robbery is taking place. Not sure they can stop it. These people that support this BS union payouts and sweetheart deals are like the lame people that sit on juries and award million of dollars to people for no other reason than its not their money and they don't feel responsible for the outcome. I could care less what extortion money GM pays to their union employees as I will never own a GM car (each GM car has about $1,200 in union health care benefits built right into the cost I hear!) Unfortunately I have given control of all my tax dollars (against my will) to some lame elected official with a low IQ with no guts and who wants to scratch the back of public employees knowing he will get the same when his turn comes. All with my money. I may need to move to China where at least the corruption is out in the open and the rules are clear.


Red Bluff CA City Council OKs letter on issue
Special to the DN
Red Bluff Daily News
http://www.redbluffdailynews.com/ci_7213979
Article Last Updated:10/18/2007 08:43:18 AM PDT

The letter approved Tuesday night by the Red Bluff City Council, addressed to the residents of Red Bluff:

"Many residents have called on the Council to reply to the Red Bluff Firefighters' public campaign regarding their compensation. We have not done so out of respect for our long tradition of not negotiating with our employees in public. Our goal has been to maintain a positive and business like relationship with the Firefighters Union, by not participating in a media debate.

"Now the Red Bluff Firefighters Association is circulating a petition and asking residents to sign it without telling the residents how much they are currently paid nor the full cost of what they are demanding from the City. Therefore, as you consider whether or not you want to support the Firefighters and their compensation demands please consider the following facts:

1. On the average, each firefighter's total compensation annually costs the residents of our City over $87,000. ($69,145 in salary and overtime plus $17,876 to fund their retirement and health insurance benefits.) Excluding the City Manager, the firefighters as a group earn on average higher wages than any other group of employees in the City, including management employees.
2. Between January 2000 and July of 2006, firefighters received the highest percentage increases in pay of any other represented group in the City:
* Miscellaneous Employees - 27.8 percent in increases.
* Police Employees - 29 percent for officers, 27 percent for sergeants, and 29.5 percent for dispatchers.
* Fire Employees - 32.5 percent (or 35.5 percent if you include the 3 percent turned down in Jan. 2006)
3. Currently the City pays both the City's and employee's share of the retirement system costs. Retirement costs the firefighters nothing.
4. Currently a firefighter can retire after 33 years of service, as long as they are age 55 or older, and receive 90 percent of their single highest year salary (plus annual increases) for the rest of their life (90 percent is the maximum allowed benefit under PERS).
5. Firefighters are demanding to be able to retire at 90 percent of their salary at age 50, with 30 working years.
6. In simpler terms, Firefighters are now eligible to receive 2 percent of their highest year salary for each year worked at age 50. They want to increase this to 3 percent for each year worked at age 50. This is a fifty percent (50%) improvement in the benefit - 2 percent per year to 3 percent per year.
7. It will cost the City an extra $190,000 per firefighter to fund just the increased retirement cost of the demanded enhanced benefit. For current Firefighters, the City will be required to borrow the added cost of the added benefit from the State and will be paying off this new debt long after the employee has retired.
8. Our Firefighters have turned down more than 9.5 percent in raises and improved health benefits offered by the City over the last three years.

"Over the last several years eight different City Councilmembers and three City Managers have concluded that our Firefighters are very adequately compensated and that it would not be fiscally prudent to increase our firefighters' already generous retirement benefits. We try to use both our hearts and our heads in making decisions for the City. While our hearts may want to reach an agreement with this group of dedicated and valuable employees, our heads and sound judgment do not see this as a financially sound course of action.

"This dispute is not about public safety. It is about how much we should pay for fire protection services and about acting in a fiscally sound manner for the whole City. We repeatedly see news stories of other cities struggling under the burden of public safety retirement costs. We are concerned about the long term financial consequences of this added expense.

"Negotiations with our Firefighters will begin soon. If the Union can set aside their demand for an enhanced retirement package, we are confident that a reasonable agreement on salary and health insurance benefits can be reached."

(signed) Wayne Brown, mayor; Forrest Flynn, mayor pro tem; Dan Irving, councilmember; James Byrne, councilmember.
Councilmember Jeff Moyer recused himself.

Lakewood Accountability Action Group™ LAAG | www.LAAG.us | Lakewood, CA
A California Non Profit Association | Demanding action and accountability from local government™

Let the voters do what politician are too afraid to do

Once again the initiative system has to step in as pandering politicians wont do the heavy lifting. Why do we even bother with Sacramento? Lets just have initiatives all year long. Clearly they have lost the ability to govern and only do what the public employee unions want or threaten. Man are they going to get a wake up call when all these dumb ass taxpayers realize what lucrative pensions they are funding for these public employees (who retire at 50) while eeking out an existence on social security at 65 (their private job pension having been blown out years ago by mergers). WAKE UP PEOPLE!

Let people decide on public pensions
BY MARYLEE SHRIDER, contributing columnist | Friday, Aug 17 2007 7:05 PM
Last Updated: Friday, Aug 17 2007 9:51 PM

Public employee unions and the elected officials who cozy up to them have, for years, denied the growing crisis that is California's ponderous pension system.

It's a system that may yet break taxpayers' backs, but few in Sacramento are willing to stand up to union leaders who insist that plush pensions are their due.

So private citizens will have to do it for them.

One of those citizens was in Bakersfield last week with the good news that voting taxpayers may soon have the chance to take public pay matters into their own hands.

Keith Richman, a former 38th Districtassemblyman, R-Grenada Hills, who termed out last year, then helped form the California Foundation for Fiscal Responsibility, said the foundation's sole purpose is to tackle the skyrocketing costs of public employee retirements.

During a speech before an appreciative lunchtime crowd at the Great Bakersfield Chamber of Commerce, Richman said the foundation's pension reform measure, which he hopes to see on the ballot in 2008, promises to check the spiraling costs of retiree benefits.

"If we don't there may be some government entities that go bankrupt and those that don't are going to die from a thousand cuts in services," Richman said. "Because of the strength of the public employee unions as a special interest group in California, I don't have any confidence at all Sacramento will address this issue."

The controversy started to swell in the late 1990s, when pension funds were making big investment gains in a booming economy. When that bubble burst early this decade, critics began to sound the alarm that lawmakers would soon be scraping to find the billions necessary to cover government workers' pension benefits.

They're remarkably generous benefits that I, as the wife of a retired city police officer, am well and gratefully acquainted with. So, unlike union leaders who continue to clamor for more and better benefits while dismissing the state's pension problem as wildly overblown, I can affirm that state, county and city employees -- particularly police officers, firefighters and prison guards -- enjoy some of the most lucrative wage and retirement benefits in the country.

It's time, said Richman, to "stop digging the hole deeper" and create a fair retirement benefit for new employees who complete a full career's work. That plan, as spelled out in the initiative, includes raising the retirement age for police officers and firefighters to 55; to age 60 for other public safety employees and to Social Security retirement age, 65 to 67-- for all others.

That step alone will save billions, Richman said.

"The 10 more years they'll be paying in gives the capital 10 more years to accumulate," he said. "The estimates for the changes we propose in the initiative are that the savings would be about $500 billion over the next 30 years -- more than enough to pay for the unfunded liability we've already accrued."

City Councilman Zack Scrivner, who has been accused by some in the media and undoubtedly at local union meetings of "demonizing" the public pension problem, said the issue is no longer what public employees deserve, but what the taxpayer can afford.

"What Richman is doing is looking at political reality," Scrivner said. "I am perfectly willing to accept the challenge to make any necessary changes locally, but the fix ultimately needs to happen on a statewide level. Because elected officials are not willing to take that stand, this unfortunately is a problem that will have to be solved by a vote of the people."

Leave it to the people -- a good idea that's long overdue.

To read the text of the CFFR's Public Employees Benefits Reform Act visit http://californiapensionreform.com/initiative.htm.

Marylee Shrider's column appears on Saturdays. Reach her at 395-7474 or mshrider@bakersfield.com.

Lakewood Accountability Action Group™ LAAG | www.LAAG.us | Lakewood, CA
A California Non Profit Association | Demanding action and accountability from local government™

The Public Employee Benefits Reform Act (2007)

1262. (07-0024) Reduces Public Pension and Retirement Health Care Benefits. Constitutional Amendment.

Summary Date: 8/13/07 Circulation Deadline: 1/10/08 Signatures Required: 694,354

Proponent: Keith Richman, John Moorlach, and Kris Hunt c/o Thomas W. Hiltachk (916) 442-7757

For peace officers, firefighters, public safety, and other public employees hired after July 1, 2009, this measure: reduces pension and retirement health care benefits; increases minimum retirement age; restricts early retirement; increases minimum age and years of employment needed to qualify for retirement health care benefits; and limits post-retirement pension increases. For all public employees this measure: prohibits retroactive increases in retirement benefits; requires public employers to make annual payments to fund future benefit costs; and allows public employers to adjust retirement contribution rates in future labor agreements. Summary of estimate by Legislative Analyst and Director of Finance of fiscal impact on state and local government: Major reductions in annual pension contribution costs for employees hired on or after July 1, 2009, offset to an unknown extent by increases in costs for other forms of public employee compensation. Major short-term increase in annual governmental payments to prefund retiree health benefits, more than offset in the long run by annual reductions in these costs. (Initiative 07-0024.) click here to read full text of initiative

Lakewood Accountability Action Group™ LAAG | www.LAAG.us | Lakewood, CA
A California Non Profit Association | Demanding action and accountability from local government™

The misconceptions continue....

Well the writer below has one thing right. The public sector pension are MUCH more lucrative than anything in the public sector but he is misguided an a number of other points:

1. Public employees are generally paid more than private sector employees even when pensions are not figured in;
2. in addition they generally work less hours per year (for similar pay) than privates sector employees (which raises their real dollar per hour wage)
3. they have much better healthcare and vacation accrual plans (and they really get to take the vacations)
4. they essentially cannot be fired or laid off either due to union or civil service rules of union rules or both;
5. Most public sector jobs are not very difficult. Most are just office jobs or low stress low danger jobs.
6. As far as firefighter and police jobs being dangerous Mr. Mysak better familiarize himself with our related story on that issue here.

California Draws Line on Public Employee Pensions: Joe Mysak

By Joe Mysak

Aug. 14 (Bloomberg) -- Roll back those pensions! Give back those sweeteners!

This may be the latest new idea in public finance to blow in from the West if Orange County, California, Supervisor John Moorlach has anything to say about it.

Tax-cap fever and the crazy-quilt creation of special tax assessment districts are just two of the modern-day contributions California has made to the world of public finance.

Next up: Nuclear war between those who get public pensions and those who don't.

Those are the words -- ``nuclear war'' -- used by Orange County Sheriff Mike Carona, commenting on a plan by the county's supervisors to challenge a pension increase given to sheriff's deputies in 2001.

The plan to challenge the retroactive increase was approved by county supervisors on July 31. Supervisor Moorlach said the increase was unconstitutional because it created an unfunded liability without voter approval, and might bankrupt the county.

Moorlach knows something about municipal bankruptcy. He was the critic who warned that Orange County's investments in derivative securities were unwise. He ran for the office of treasurer and tax collector in 1994 and lost to popular incumbent Robert Citron. In December of that year, the county became the biggest municipal bankruptcy case ever after its investments tanked. Moorlach was appointed to fill out Citron's term in March 1995, and won re-election twice before being elected a supervisor last year.

Everyone's Watching

Everyone in California is going to be watching the county, and if it prevails in court, because so many state and local agencies did the same thing when it looked like pension funds were awash in cash.

What the county did in 2001 was to approve a plan to allow sheriff's deputies to retire at age 50 with 3 percent of their peak year of pay, multiplied by the number of years they served. This was a 50 percent raise above the previous plan, which allowed them to retire at 50 with 2 percent. The new plan took effect in 2002.

For example, a deputy retiring after 25 years at age 50 with a $143,955 salary would get a pension of $71,978 under the 2 percent plan, and $107,966 under the 3 percent plan, Moorlach pointed out in his presentation.

Moorlach says the increase is unconstitutional, because it created a new liability, one not approved by the voters and one that created an immediate shortfall because no money had been set aside to pay for it. He wants the increase to be rescinded, or for the deputies to chip in and help pay for it.

21st Century Problem

If the county prevails, and that's a big ``if,'' states and localities across the nation will probably start looking at how they, too, might roll back what are now being seen as overly generous pension benefits granted to government workers.

Public pensions are a 21st-century problem. Nobody really gave them much thought before now. Decades ago, few people begrudged police or firefighters, people who put their lives on the line every day, full pensions with benefits.

Even as the size of state and local government grew, few people felt envious of those civil servants who weren't in the line of fire, those with clerical jobs or those in the parks department or the department of sanitation, for example, who received similar retirement packages.

Everyone knew that in exchange for salaries that were somewhat lower than those on offer from private companies, people who worked for government got nice retirement benefits.

Nobody really thought about those benefits until recently, until about the time private companies started doing away with their own pension and benefit plans, replacing them with limited contributions and making most employees responsible for saving for their own retirements.

Union Battle

So now everybody is looking at public employees' pensions, and wondering if we, the taxpayers, can afford them.

We're looking at them because of envy. We're looking at them because our elected representatives seem to have juiced some of those plans up considerably while we weren't looking.

And we're looking at public-employee pensions because it looks like our elected representatives haven't put enough aside to pay for those liabilities, stinting on annual contributions and otherwise not planning ahead. The bill is coming due as surely as all those baby boomers reach retirement age.

And now, thanks to a new rule from the Governmental Accounting Standards Board, we have something else to worry about -- not just pensions, but those so-called other post- employment benefits, chiefly health care, promised to public employees. States and localities are in the process of tallying those, and the final figure just for those benefits might be $1 trillion-plus.

Until now, those costs were usually paid for on a pay-as- you-go basis; GASB wants municipal governments to calculate about how much they promised, and include the figure in their financial statements. Surprise!

Welcome to the next union war.

To contact the writer of this column: Joe Mysak in New York at jmysakjr@bloomberg.net


Lakewood Accountability Action Group™ LAAG | www.LAAG.us | Lakewood, CA
A California Non Profit Association | Demanding action and accountability from local government™

Who in the private sector retires on 70 to $100,000 per year?

Really it does not matter if the liabilities are funded or not. (Long Beach claims they are) Quite frankly I dont trust the accounting shenanigans of most government entities, especially when we are looking at 40-50 years out from now on these pension liabilities. Lets keep this wave going and put taxpayers back in charge. Once they start seeing what public employees are getting and they aren't the sentiment will change, no matter if public employees are heroes or not.


Deflating big pensions
LB Press Telegram
http://www.presstelegram.com/opinions/ci_6545873
Article Launched: 08/04/2007 05:56:29 PM PDT

Orange County's challenge could help shrink deficits throughout California.

There has been a lot of angst but little action about costly government pensions, but that changed abruptly last week in Orange County. A local confrontation there could affect public employees throughout the state, and save taxpayers billions of dollars at the expense of public employees.

Orange County supervisors, at the instigation of one of them, John Moorlach, voted to test the constitutionality of big pension increases given in 2001 to county employees. If they prevail, the county would be off the hook for up to $550 million over the next 30 years in unfunded pension liabilities.

It also would mean that other cities, counties and the state would be in a similar position, of having passed out big pension benefits that amounted to illegal gifts of public funds.

The theory advanced by Moorlach, and supported by constitutional scholar John Eastman of Chapman University Law School, is that Orange County acted illegally when it granted a big pension increase effective retroactively, not in the sense that already-retired employees would get the increase (they didn't), but that employees would be getting an increase they hadn't
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earned for past service, as well as an increase for future service.

Moorlach also argued that the increase violated debt limits, since it was unfunded, and amounted to a gift of public funds, since it was unearned by past service. Although the pension increases had been made permissible by state legislation, the way they were implemented was wrong.

A wave of pension increases throughout California followed that legislation, and created pension liabilities of billions of dollars. In Orange County, as in Long Beach and most other cities and counties as well as state government, public-safety employees got pensions of "3 at 50," meaning that an employee could retire at age 50 with a pension of 3 percent of the highest salary for every year of service.

Many cities and counties, Long Beach among them, followed up with fat pension increases for non-public safety employees as well, some so overly generous an employee could actually retire with a pension bigger than his or her salary.

Most of these aren't backed with a plan to pay for them, although Long Beach's pension liabilities are well funded. Orange County's are not.

If the names of Moorlach and Eastman seem familiar, it's for good reason. In the 1990s, Moorlach was derided as a Chicken Little until the skies did fall in with the bankruptcy of Orange County because of risky investments. He went on to be appointed and elected county treasurer, then county supervisor (his license plate reads SKYFELL). Eastman has involved himself in land-condemnation issues in Long Beach.

Now Moorlach is warning that pensions in Orange County are so far out of line they again could bankrupt the county. Eastman, who is dean of the Chapman University law school, says he thoroughly agrees with Moorlach's points about the pensions' questionable legality.

Rescinding the public-safety pension increases in Orange County would mean a 30 percent cut for employees of the Sheriff's Department, where a retiree now gets an average of $70,000. Another way out of the problem would be for employees to pay for the pension enhancements.

If it turns out the pension increases are constitutional, Moorlach and others seem determined to do something about pension costs Orange County can't afford to pay.

Either way, Moorlach and his colleagues will have done a great service for taxpayers of his county, and, we hope, throughout the state.

Lakewood Accountability Action Group™ LAAG | www.LAAG.us | Lakewood, CA
A California Non Profit Association | Demanding action and accountability from local government™

We like what we read...

A little slow on the uptake but at least the battle lines are getting drawn. The danger to our society was/is not Al Qaeda all along. Its public employee unions. (and of course the politicians who feel the must pander to them over the small but more numerous voices of taxpayers) Hmmm who would have thought....

http://www.ocregister.com/column/cops-board-believe-1793174-deal-percent
Wednesday, August 1, 2007
Cops' pay has been ripe for backlash

FRANK MICKADEIT
Register columnist
fmickadeit@ocregister.com

The Board of Supervisors says its decision yesterday to begin considering whether to roll back some sheriff's deputies' and D.A. investigators' retirement benefits is necessary because the supervisors must uphold the state Constitution.

And, yes, if the benefits are ultimately cut, it will be because a court rules the 2001 benefits deal violates the Constitution.

But don't make the mistake of believing that at its core this is about fealty to the Constitution. That's a means to an end. That end? Well, the noblest would be fiscal responsibility – not driving the county deeper into unfunded liability. That's undoubtedly amotive, and Supervisor John Moorlach says it is his.

But what I believe this really is about in the global sense – the reason there's support for this beyond one number-crunching supervisor – is because of growing backlash against what are perceived as overly generous contracts for law enforcement. And against police unions' ability to extract those contracts from politicians.

Three- or four-day work weeks. Liberal overtime and vacation policies. Retirement after 25 years at age 50 at 75 percent of their highest salary. (The so-called "3-percent-at-50" that is the subject of this debate.) Stress-related retirements that allow cops to retire with 100 percent of their salary at almost any age.

I'm not just talking about O.C. cops. I'm talking about cops statewide, perhaps best exemplified by a prison-guard union so powerful we're about to be put under total federal control. Politicians who try to rein in compensation find themselves facing election opponents funded by police unions.

The citizenry gives cops tremendous police powers to begin with. When it comes to believe cops are also so powerful they can write their own tickets financially? That breeds a sense the checks and balances are out of whack.

This perception – true or not – has been building now, for at least two decades, with a significant break after 9/11, when we realized just how much these brave men and women mean to us. It's no coincidence that the 3-at-50 deal was cut in December 2001. I'm not here to argue for either side; I'm just analyzing what I believe to be the real driving force, where the overall political will to do this comes from. Grocery clerks' bennies cut. Other hourly jobs go overseas. Cops get fat increases? Backlash city.

See, this has huge statewide implications. Other cities and counties are watching. They were just waiting for someone like Moorlach to come along and make the first move. Moorlach's chief of staff, Mario Mainero, estimates public agencies statewide have $13 billion in unfunded liability because of retroactive pensions.

Here's a very telling indication of how big a deal this is: Mike Capaldi, Dale Dykema, Buck Johns, Tracy Price, Rich Wagner. You know who these guys are? They are leaders in the Lincoln Club, the high-rolling conservative

Republican group founded here in 1962. Some are also members of the even more high-falutin' New Majority.

These guys don't play politics at this level. They're kingmakers. They sit back, give audiences to would-be politicians and write checks. They help put supervisors in office; they don't deign to attend their meetings, for God's sake. But there they were yesterday, sitting in a pack in the Board Chambers. I asked each when he last attended a Board meeting. This is, after all, the most powerful elected local body in Orange County. Capaldi: Can't remember the last time. Dykema: Never. Johns: 15 years ago. Price: Never. Wagner: Years ago.

Wagner, the president, got up and told the Board that hisboard had already voted on whether the county should challenge the 3-at-50. The vote: Yes, 24: No, 0.

It was interesting to see the two men the Lincoln Club helped breathe life into at their political infancies – Mike Carona and Tony Rackauckas– get up yesterday and more or less side with their employees. Both men were somewhat cautious – although Carona called cutting 3-at-50 now "go(ing) to guns" – and urged the supes to take time to study the matter.

T-Rack came off as about the most even-keeled speaker of the day, drawing on his staff lawyers' analysis (do I sense the hand of B. Gurwitz?) and his own experience as a judge to caution the five-member non-lawyer Board that if they go to court, it won't be the slam-dunk victory they might have been led to believe. Can't wait.

Contact the writer: Mickadeit writes Mon.-Fri. Contact him at 714-796-4994 or fmickadeit@ocregister.com.

Lakewood Accountability Action Group™ LAAG | www.LAAG.us | Lakewood, CA
A California Non Profit Association | Demanding action and accountability from local government™

Can we hire this guy in LA?

Standing up to public safety officers? Oh my God. This guy will be burned at the stake for heresy!


Saturday, July 21, 2007
Supervisor says deputies' pensions are illegal
John Moorlach singles out sheriff's deputies union for cuts.
By PEGGY LOWE
The Orange County Register

An Orange County supervisor's first step to reduce public pensions Friday placed sheriff's deputies on the defensive and triggered a legal battle that could have statewide consequences.

Supervisor John Moorlach, long a [public] union critic [as all politicians should be as public unions are anti taxpayer; LAAG ed.], announced his plan to cut pension benefits retroactively paid to members of the sheriff's deputies union by arguing they are an illegal "gratuity" that must be rescinded. He wants to cut the retirement payments by one-third by creating a "blended" formula.

The Association of Orange County Deputy Sheriffs, the only union Moorlach singled out, said it was surprised by the public announcement but will respond to the legal battle. Mike Carre, the union's interim general manager, wondered why Moorlach didn't ask for the union's opinion because the 1,800 members have been working without a contract since October and have been in negotiations.

"In a true collective bargaining environment, one side goes to the other and says, 'We want to talk about it,' " Carre said. "All of a sudden on a Friday morning, Supervisor Moorlach has a press conference."

The announcement comes seven months into Moorlach's first term as a supervisor, and his public launch sets the proposal into high gear. The five-member Board of Supervisors first debates the plan July 31, when Moorlach hopes to win approval to get an injunction that will halt some pension payments to retirees.

"How do you give a nice benefit when no one has paid for it?" Moorlach said, referring to the $2 billion unfunded liability of the county's retirement programs.

If the board gives Moorlach the go-ahead and a court approves an injunction, retirees' payments could be affected within months. The effort could take years, as it's expected to go to the California Supreme Court.

Moorlach seemed hopeful his plan would gather strength statewide, saying he planned first to take the issue to court, and then, "Every other municipality in the state would have to decide what action to take."

But a state coalition working to protect public employees' pensions quickly responded to the plan, calling it illegal and unethical. The county plan, coupled with Moorlach's support of a proposed statewide initiative that would cut the pensions of newly hired public employees, shows he wants to make public workers the "fiscal scapegoat," said Dave Low, chairman of Californians for Health Care and Retirement Security.

Here are the answers to some questions about the plan:

How does Moorlach justify changing a decision approved by a former board in 2002?

The first legal argument centers on the union's asking to reopen an existing contract in 2001 and winning that approval in 2002 for the "3 percent at 50" formula. The formula allows for what critics say is a generous annual pension at age 50 – 3 percent of final pay times years of service – but one the deputy sheriffs say is a well-earned retirement for people who work in dangerous jobs.

Moorlach's plan would blend two formulas, paying the deputies 2 percent for time up through roughly mid-2002 and 3 percent for time served after. He thinks that when the board approved the new formula and applied it retroactively, it was unconstitutional because of debt limitations on local governments and a constitutional ban on public-funds gifts.

Will this plan include the county's other unions?

No. The 13,500-member Orange County Employees Association, which represents the majority of county workers, doesn't fit into Moorlach's legal strategy because its members raised their contributions to pay for its 2.7 percent-at-55 formula.

How many people will be affected?

There are no specific figures, but it's estimated the plan could affect about 2,800 employees and 500 retirees.

Would Moorlach's plan save the county money?

The short answer is yes. The long answer is a little more difficult. County analysts haven't made a determination. Moorlach said the plan could save the county $184 million to $550 million, but it could also cost the county law-enforcement officers. Carre predicted many people thinking of joining the Sheriff's Department, as well as many current employees, may go to one of the city police forces, which use the 3 percent-at-50 formula.

SANTA ANA – Past pension benefits paid to members of the sheriff's deputies union are an illegal "gratuity" that must be rescinded, Supervisor John Moorlach said today.

In the formal announcement of his plan to cut public safety employees' retirement by a third, Moorlach said he will first seek an injunction against retroactive payments made on years served before 2002, creating a new "blended" formula for pensions.

Moorlach outlined a legal strategy he will ask the Board of Supervisors to approve July 31, hoping for long-promised public pension reform and stirring a political pot that will undoubtedly infuriate the Association of Orange County Deputy Sheriffs union.

Wayne Quint, the union's president, did not return several calls seeking comment.

If the injunction is won, it could affect retirees' payments within months. That, in turn, could send some retirees back to work and certainly change life plans about spending. The entire effort could take years, as it's expected to go to the California Supreme Court.

Moorlach acknowledged that his proposal could affect hundreds of retirees and those still working.

"We're talking about people's lives, so we're not excited about what we're going to share," Moorlach acknowledged. "But we also have taxpayers who are going to pay a high price."

The three key legal arguments all center on the union's asking to reopen an existing contract in 2001 and winning approval in 2002 for the "3 percent at 50" formula. That allows for what critics say is a generous annual pension at age 50, but one that the deputy sheriffs say is a well-earned retirement for people who work in dangerous jobs.

Moorlach's plan blends two formulas, paying the deputies 2 percent for years before 2002 and 3 percent for the years served post-2002. He believes that when the Board of Supervisors approved the new formula, and applied it retroactively, it violated three provisions of the California Constitution:

Debt limitations on local governments.

The ban on gifts of public funds.

The barring of extra compensation for work already performed.

The 13,500-member Orange County Employees Association, which represents the majority of county workers, doesn't fit into Moorlach's legal strategy because its members upped their contributions to pay for its "2.7 percent at 55" formula.

Although he didn't have specific figures, it's estimated that the plan could affect about 2,800 employees and an estimated 500 retirees. Moorlach said the plan could save the county $184 million to $550 million.

Long a critic of public pensions, Moorlach has had several public battles with the deputy sheriffs union. That fight intensified last year after the union endorsed and helped finance his challenger. After the election, Moorlach called union leaders "thugs," then quickly called for an audit of a multimillion-dollar health-insurance fund administered by union leaders. He said the deputies should also accept the same cuts on retiree medical benefits that other employees took last year.

Union leaders fired back, sending 870 signed letters to Supervisor Chris Norby, the board's chairman, asking him to bar Moorlach from attending law-enforcement functions and funerals. During a dramatic board meeting in January, uniformed deputies showed up in force and told the board that being called thugs was irresponsible and demoralizing.

Skyrocketing public pension costs have gained attention across California, and many are urging state and local governments to trim the benefits or change how they are funded.

In December, Gov. Arnold Schwarzenegger appointed a 12-member commission to identify how much the governments owe and suggest ways to fund the benefit programs. Orange County faces a $2 billion deficit in its pension system and $1.3 billion for retirees' medical benefits.

Rich Wagner, president of the Lincoln Club, a group of GOP power brokers, said he hadn't heard of Moorlach's plan. But the county's unfunded liability is "irresponsible" and shouldn't be left for future generations to pay with their taxes, he said.

"Whatever is done, it's prudent for the supervisors to take a look at the cause of that and what should be done for the future," he said.

Contact the writer: (714) 932-1484 or plowe@ocregister.com

Lakewood Accountability Action Group™ LAAG | www.LAAG.us | Lakewood, CA
A California Non Profit Association | Demanding action and accountability from local government™

"There needs to be some accountability."

I love the last line of this article which is a quote from the pension board member re the County union employees. Actually she has it backwards (like most politicians). The accountability needs to run FROM the politicians and the county union members to the taxpaying public. Remember our name here is the Lakewood ACCOUNTABILITY Action Group. Accountability is literally our middle name!!


Fresno Co. pension confusion compounded
Instead of getting refunds, some Fresno Co. employees may have to pay more.
By Brad Branan / The Fresno Bee
07/19/07 04:24:11

About 5,000 current and former Fresno County employees expecting refunds from a retirement fund may have to make payments instead.

The possible change in direction, discussed Wednesday by the county Board of Retirement, came after an actuarial firm found yet another miscalculation in how employee contributions were determined.

The latest report drew anger and disbelief from county employees.

"Employee morale is at an all-time low," county employee Jon Endara told the board.

In February, plan administrator Roberto Peña said thousands of current and former employees could expect refunds of roughly $1,000 each because an audit found that they had been paying too much for cost-of-living increases.

That estimate was based on a review by The Segal Company of San Francisco.

On Wednesday, however, Segal officials told the board that after further review, they found that about 5,200 employees actually paid too little for cost-of-living increases -- $1.1 million less than they should have.

The new finding was based on a review of data not covered in the first audit of the $2.5 billion pension fund, Peña said.

But some employees still could get a refund.

About 1,000 current and former public safety employees were found to have paid too much into the plan -- a total of $4.4 million, said Paul Angelo, a Segal vice president.

Officials are still crunching the numbers. The board Wednesday asked a consulting firm to figure out exactly how much employees might be asked to repay -- or receive in refunds. A decision could come during the board's Aug. 15 meeting.

The confusion left board members scratching their heads.

"This is totally unacceptable," said board member Alan Cade. "There's no excuse for this."

Board members and Peña on Wednesday said they would consider conducting more audits -- possibly as often as every three years -- to better detect such problems. The audit that turned up the original rate mistake was the plan's first in 50 years, Peña said.

Employees and union representatives Wednesday told board members that they should stick to the original plan of issuing refunds.

"You've told them they're going to get refunds," Endara said.

Henry Lopez, a county program supervisor, questioned the figures, saying employees are due a refund.

"We're not talking about a world where one plus one equals two. We're talking about actuaries," he said. "You can arrive at any number you want."

But Angelo defended the new rate estimates. He said the actuary who made the mistakes -- Ira Summer of Public Pension Professionals -- has acknowledged that he incorrectly calculated the cost-of-living adjustment factor for one fiscal year. Summer agreed with the new calculation by Segal's actuaries, Angelo said.

Summer did not return phone messages left Wednesday at his Oakland office.

The conflicting information from the actuaries has left pensioners frustrated, said retirement board member Stephanie Savrnoch.

"Our members don't have confidence in what they're being told," she said. "There needs to be some accountability."

The reporter can be reached at bbranan@fresnobee.com or (559) 441-6679.

Lakewood Accountability Action Group™ LAAG | www.LAAG.us | Lakewood, CA
A California Non Profit Association | Demanding action and accountability from local government™

Trying to Hide the pension mess from Taxpayers

Well Arnie is starting to act more and more like a Democrat. Great idea. Lets use secret bonds not approved by the voters to finance the pension mess. Whoops. That's illegal. Damn courts getting in the way! Well we don't want to ask the voters what to do...or do we? Hell they are stupid enough to pass most other bond issues we run up the flagpole so why not this one. I hope the taxpayers never figure out that they have to pay for all these bonds as well as all the interest on them and that it is all so the fat cat public employees can retire at 50, 15 years before the private sector, with at least twice the benefits.

Hats off to The Fullerton Association of Concerned Taxpayers (whom we linked to long ago) for catching this and nipping it in the bud so that that voters can at least try to stop this madness.

http://globalpensions.com/?id=me/17/news/28/46004/38/
State loses bond battle
by Heather Dale 04-07-2007

US – Governor of California Arnold Schwarzenegger’s administration has lost its court case bid to issue US$560m in bonds to cover government pensions

The Third District Court of Appeal ruled that the State’s proposed “pension obligation bonds” are illegal because they were not submitted to voters as the Californian Constitution requires.

A court document stated: “Concluding the pension obligation is one imposed by the State on itself and, therefore, does not fall within an exception for obligations imposed by law. The court entered judgment against the Committee.”

Authorised by the Legislature and the governor in August 2004, the bonds were designed to pay a portion of the State’s contribution to the Public Employee Retirement System (CalPERS) for a single year.

The Fullerton Association of Concerned Taxpayers (FACT) was the only challenger to the bonds in a “validation” action brought by the State. In late 2005, Sacramento County Superior Court Judge Raymond Cadei ruled the bonds invalid under Article 16, Section 1.

The State appealed, argument was held by the Third District on 25 June, and this ruling is the result.

Pacific Legal Foundation attorney Harold Johnson, who represented FACT in challenging the bonds, said: “The court upheld the basic right of the people of California to chart their fiscal destiny and have the ultimate say over major state borrowing.

“The court affirmed that the Legislature can’t saddle the people of California with major debt without first getting their permission. This ruling should also be a warning to spendthrifts in government. They can’t spend like tipsy sailors and automatically borrow their way out of the mess they make.”

Property Taxes, Retirement Promises, and Municipal Bonds

This is a great article and we wish more would read it. Then perhaps people would see that local govt follies and deficits are just as bad as at the federal level, just more hidden....[editor]

by Gary North
http://www.lewrockwell.com/north/north537.html

Investors like bonds. Bonds are sources of long-term income. As investors grow older, they invest a greater percentage of their portfolios in bonds. They are more concerned about income than they are about capital appreciation. The louder the clock ticks, the more important income is, compared to stock appreciation.

A major problem for bond holders is the solvency of the issuing institution. Bond-rating services are important for investors, including institutional buyers, especially retirement fund managers. The less likely the ability to repay, the lower the bond rating. The lower the bond rating, the higher the rate of interest the issuing institution must pay.

This means that someone who has purchased bonds of an issuing agency whose bond rating falls will suffer a loss of capital. The market value of his bonds falls when the interest rate on newly issued bonds rises. Bonds rise or fall in price inversely to the interest rate.

Across the nation, municipal governments are facing downgrading of their bonds. The reason is unexpected health care obligations for retired workers. This problem is growing. There is no way out of it without governments having to revoke promises, either to retired workers or to investors.

THE LURE OF TAX EXEMPTION

The promise of income tax-free returns has led millions of investors into buying municipal bonds. In states with a state income tax, munis issued by cities within that state are usually exempt from state income taxes. This benefit seems great to rich people who have grown tired of paying income taxes all of their adult lives. So, they choose to buy munis instead of higher-interest taxable bonds. They enjoy the pleasure of not having to report this income to the tax authorities.

By forfeiting tax revenues from income generated by various local municipal bonds, the Federal and state governments have granted an implicit subsidy to the debt instruments of local governments. This has encouraged local governments to issue more debt than they otherwise would have. They would have had to pay out higher rates of interest than they actually agreed to pay. This higher cost would have made additional debt issues less likely.

Investors took the bait of a lower tax burden. The municipalities took the bait of lower interest rates paid by income tax-free debt instruments. The result: lots of debt.

The problem with this arrangement is that municipal governments are run by politicians who want to be re-elected. Their time frame is relatively short: the next election. They know that they will not be in office if the obligations to pay off the bonds begin to squeeze the local budget. They stay in office by delivering what appear to be free services to local voters. So, they are tempted to issue debt as a way of buying votes in the next election without personally suffering the political consequences when the future debts come due. This tends to increase the level of municipal debt.

A bond is a promise to pay investors. The longer the debt repayment period, the more likely it is that the debt level will increase because of the time perspective of politicians, who issue debt and promote bond issues to the voters. The politicians vote in terms of their personal time perspective – the next election – on behalf of an impersonal entity that in theory is immortal: the city government.

Just as the hope of income tax-free returns lures investors into buying municipal bonds that pay a lower rate of interest than corporate bonds of equal risk ratings, so is the lure of free health care in old age for municipal workers. They have for decades accepted wages that are lower than those paid to employees in profit-seeking firms because of the seemingly superior health care benefits that municipal governments offer to their workers and retired workers.

RISKY ASSUMPTIONS

First, bond investors make an assumption: municipal governments will fulfil their obligations because they can tax residents to meet the payment schedule. Because a city government can tax residents, investors assume that residents cannot escape.

Second, workers make an assumption: residents will have no choice but honor their obligations to retired workers.

Third, residents make an assumption: politicians will not increase the debt obligations of the government to levels unsustainable by future tax revenues.

Fourth, politicians make an assumption: tomorrow will not come during their terms in office. Different elected officials will be in office when the bills come due.

Fifth, the thought of default is not on the minds of any of the participants. They all assume that the municipality will always be able to meet its contractual obligations. The system of negative sanctions known as bankruptcy is widely assumed by all participants as somehow not applying to municipal governments.

There is confidence that governments can somehow escape the laws of economics. Somehow, income will always be there for governments to tap. Somehow, obligations will not exceed revenues. Somehow, the bills will not come due.

WARNINGS

From time to time, there is a newspaper report, probably run in the section on city or county government, that raises the question of solvency. A local reporter files a story on a report by some committee on the escalating fiscal burden of employee retirement programs, especially the portion associated with health care insurance. The story surveys the fact of rising health care costs and compares this with expected revenues.

Residents read these stories, if at all, with no sense of alarm. They figure they can always move away if the local tax burden gets too high. They don’t think of what this legal tax burden will do to local property values. This unintended consequence is never mentioned in the article. Readers see rising prices on property, and they conclude that there will always be someone ready to buy their homes, no matter what the property tax burden is.

In other words, they discount the risks of the future. So do local politicians. So do bond investors. So do employees of the local government. So do retired employees.

This is the great threat of debt in our era. People do not believe that governments will default. They assume that political promises to pay will be honored by voters in the future. After all, these promises have been honored so far.

CALIFORNIA DREAMING

In a June 10, 2007 story run by the Los Angeles Times, "Public sector reels at retiree healthcare tab," a reporter dutifully reported on growing evidence that municipal governments have run up bills to municipal employees on a scale that the public has not imagined.

The article began with a human-interest story. An 83-year-old San Diego woman who suffers from hallucinations if she doesn’t receive her medicine. She also suffers from cancer and diabetes. She is now facing homelessness. She had been a county employee. She has a $1,000 a month pension. She also has medical coverage for whatever Medicare does not cover. The story says she may lose this coverage. "Where has compassion gone?" she asks.

It has little to do with compassion. It has to do with politics. This woman made the mistake of confusing compassion and politics. So have tens of millions of Americans who are dependent on government payments for work performed or taxes paid decades ago.

The issue is contract, not compassion. The courts cannot measure compassion. They can read contracts. If courts allow politicians to break contracts, those who are dependent on former political contracts are at risk.

Medicare and Social Security obligations are unfunded. Some estimates are that these two programs are unfunded in the range of $70 trillion. Yet these obligations are not counted as part of the on-budget debt of the United States government. This figure is in the range of $9 trillion.

Why the discrepancy? Legally, it exists because the U.S. government says that Medicare and Social Security obligations, unlike public debt in the form of T-bills and T-bonds held by the public and the Federal Reserve System, do not constitute legal obligations of the United States government. Some future Congress may reduce the payments. That is Congress’s option.

Local governments have obligations to retirees analogous to the obligations of the U.S. government to retirees. The courts are far less willing to enforce these contracts, compared to bonds.

The trade unions of course will battle any such unilateral default. But these unions are growing less and less powerful over time. As voters grow tired of the burdens imposed by retired workers, the municipal workers’ unions will face a restricted market.

Voters are not enamored of trade unions in our day. Well over 85% of all American workers are not represented by trade unions. Most of those who are represented by unions are government employees. Voters who are not union members are not reliable supporters of tax policies whose main beneficiaries are retired city or county workers.

The expected obligation of the Los Angeles Unified School District for health care coverage is in the hundreds of millions of dollars, the article reports. "These costs are just crushing," said district general counsel Kevin Reed.

Over the next three decades, the state of California is facing annual payouts of a billion dollars a year, and maybe more.

Contra Costa County’s retiree healthcare tab is on track to grow larger than the value of all its assets by 2012, according to a government report, which would make the county at that point "technically insolvent."

This is not way into the distant future. This is in the next five years. And the flow of red ink is just getting started.

In just four years ending in fiscal 2004–05, the cost of providing healthcare to the average Los Angeles County retiree doubled. By 2011, government retiree healthcare costs statewide are projected to be nearly triple those in 2004.

Private companies are now in the process of re-negotiating contracts regarding health costs for retirees. The era of such benefits is coming to an end in the private sector. But it seems to persist in the public sector. It will not persist for long. When taxpayers see their property taxes rise and the value of their homes fall, they will be in no mood to suffer escalating capital losses because of promises made to municipal unions a generation ago.

The state of California estimates that the price tag for providing such health benefits has reached more than $500,000 for a married retiree and spouse who live 20 years after retiring. Because many government employees retire before 60 and since life expectancies continue to grow, the cost could easily reach $1 million for some employees.

This is not going to happen. Any retiree who expects it to happen is living in a fantasy world. Voters will not suffer capital losses and ever-rising taxes in order to maintain contractual obligations negotiated in better fiscal days.

Compassion is a matter of voluntary considerations and individual circumstances. It has to do with charity. "Where has compassion gone?" It went away a long time ago, when union members decided that contracts negotiated on the threat of organized simultaneous walkouts by workers became a substitute for compassion. When political power was substituted for compassion, compassion moved off the scene.

The reporter cites a statement from an employee of an accounting firm that helps municipal governments track their future obligations. "I can’t tell you how surprised many of our clients have been," he said.

Surprise, surprise! Accounting actually matters. But politicians have paid little attention to accounting. Neither have union leaders, who for years could take credit for negotiating on-paper successes in future health care retirement benefits. Neither have retirees.

How large are the benefits? Consider this. The article describes a retired employee of San Diego County who served 30 years. At the time of his retirement, he was earning $80,000 a year. His retirement pension is $70,000 a year, plus the health care benefits.

The county’s officials are considering a plan to reduce the health care benefits of high-salaried employees. This of course is a means test. It is a clear violation of contract. The municipal union is fighting this decision. But the union is not in a strong bargaining position. The county charter allows the retirement board to cut off retirement benefits to all retirees in one fell swoop.

Los Angeles County has no such loophole. State law prohibits this. It is facing costs of $20 billion over the next 30 years.

There is some talk that the various governments should put aside present revenues to pay future obligations. This has not been done in the past. Will this work? No.

The nonpartisan California Health Care Foundation projects that, thanks to skyrocketing healthcare costs, an upcoming surge of retirements and lengthening life spans, the price to governments of continuing to provide coverage at the current rate will increase 15% a year over the next 15 years. Even if public employers had many billions to invest – which they don’t – insurance costs will continue to rise much faster than investment earnings, the foundation says.

A political battle looms among retirees, bond investors, and taxpayers.

PROPERTY TAXES

The housing bubble has obscured the future of housing prices in an era of huge public employee retirement obligations.

This much is certain: contracts will be violated. The question is: Which group will be the biggest losers? Retirees, bond investors, or taxpayers?

When you consider a place to live out your golden years, one consideration should be local municipal bond obligations. Counties and cities without a long tradition of bond issues are preferable to those that have run up large liabilities. But equally important is the obligation to retired workers.

Large cities are generally far more exposed to lawsuits for default and union pressures than small towns are. They have run up larger bills. This is another reason for retirees to get outside of large cities.

Don’t own a home on the fringes of a tax-hungry city. Nonincorporated areas are being swallowed up by cities, which don’t allow county residents to vote on the absorption. County taxpayers are regarded as under-taxed fish to catch. So, it is better to be in a small incorporated city. This keeps urban debt monsters at bay.

CONCLUSION

Municipal bonds are higher-risk investments than most investors believe. I think it is much safer to buy a bond fund filled with bonds denominated in currencies other than dollars. This way, you hedge your risk against a depreciating dollar. You must pay income taxes on the income. Better this than to pay the inflation tax when the dollar is debased by the Federal Reserve System in order to pay off government debts at all levels.

Debasing the dollar does not involve breaking any legal contracts. That’s why it is so predictable, long term.

June 13, 2007

Gary North is the author of Mises on Money. Visit http://www.garynorth.com. He is also the author of a free 19-volume series, An Economic Commentary on the Bible.
garynorth@garynorth.com

Copyright © 2007 LewRockwell.com

What pension liability...?

LAAG does not like the sound of this. On the one hand we like the Texas legislature saying the public coffers are not "guaranteed" to be paid to secure health benefits to public workers (just like in the private sector there are no guarantees of anything). How ever it looks like states are taking their cue from the feds: just fix the accounting so that no deficit has to be disclosed to the public! PERFECT! Why didn't we think of this before? If we don't show the liability on the books it does not exist right? This is the way public officials and politicians actually think. Maybe they will let all the private citizens that support these public workers do the same "creative accounting" on their taxes. Somehow I don't think that will happen. Unbelievable.


Daniel Weintraub: Moving past denial on retiree health care liability
By Daniel Weintraub -

Published June 12, 2007
Story appeared in EDITORIALS section, Page B7
http://www.sacbee.com/110/story/217072.html

There has been a lot of gloom and doom lately as California's state and local governments have begun to come to grips with the massive unfunded liability they face for health benefits they have promised to retired public employees.

But it could be worse. They could be downplaying the problem and telling the obscure private board that sent them into this scramble to buzz off.

That's what at least two states -- Texas and Connecticut -- appear to be doing. And the rebellion might be spreading. But not to California, so far.

And that's at least a glimmer of good news in an otherwise depressing story.

The Government Accounting Standards Board set all of this in motion when it ruled that state and local governments should tally up how much they owe for retirement benefits and then disclose that number publicly as part of their official balance sheets.

But not everyone is going along.

Texas made national headlines last month when its Legislature passed a bill that declared the Lone Star State independent of the accounting board on this issue. Since Texas does not have public employee unions or union contracts, state officials contend that the health benefits they pay to retirees are not guaranteed. The Legislature, in theory, approves them every two years with the budget and could revoke them at any time.

As a result, the state's comptroller, Susan Combs, has argued that it would be wrong to disclose a long-term liability and worse to set aside money to pay for it, since, in her view, no obligation exists.

She may be on firm legal ground. Some local governments in California are considering the same issue. They are not turning it into a protest against the accounting standard or the board itself, as some in Texas seem to want to do. They're just saying that if they don't guarantee the benefits, then the taxpayers are not liable for those benefits into the future. That makes some sense.

Combs wants to create a separate accounting mechanism to measure and report what the liability would be if Texas continued to pay health benefits to retirees as it does today. That number is expected to be about $50 billion over the next 50 years.

Connecticut's challenge to the standards is both more subtle, and more troubling. That state does have a true, legal liability. It just does not want to admit it.

Connecticut's Legislature is considering a bill that would authorize its comptroller to simply ignore the accounting board's rules -- all of them -- and come up with her own instead.

Comptroller Nancy S. Wyman has suggested that Connecticut set aside $100 million from a surplus in this year's budget and 10 percent of any future surpluses. Those actions, she said, would help reduce the state's projected liability of $21 billion. But she says that trying to do more would risk a backlash from legislators and the public that might result in even less progress.

"I'm trying to get this state back onto the right accounting principles and to do its accounting and budgeting in the right way, and the only way I can do that is by this piece of legislation," Wyman told the New York Times.

If that's the case, ignoring widely accepted accounting standards is a strange way to go about it.

In nearby Suffolk County, N.Y., the comptroller was even more blunt -- and more ignorant.

"All of a sudden we have to project 25 to 30 years down the road," County Comptroller Joseph Sawicki Jr. told Newsday. "It's ludicrous. ... It's another bureaucratic mandate coming from the federal government, which is costing every municipality money to hire these consultants to evaluate our costs down the road."

Actually, it's not a federal government mandate. The Government Accounting Standards Board is a private, nonprofit organization, and its standards are voluntary. Its purpose is to make government accounting at least as transparent as corporate accounting, to give the public and investors more insight into public agencies' assets and their liabilities.

Fortunately, the kind of pushback the standards are getting elsewhere hasn't been happening in California. State Controller John Chiang hired an actuary a year early to determine what the state's liability will be. His answer: $48 billion.

Gov. Arnold Schwarzenegger and the legislative leaders, meanwhile, have appointed a commission to study the problem and recommend ways for the state and local governments to deal with it, either by setting money aside or by reducing benefits, or both.

And CalPERS, the state pension agency, has established an investment fund to which the state and local governments can contribute and (it is hoped) see their money grow over time, paying for retiree health benefits the same way that pensions have been financed for years.

Getting on top of this issue is not going to be easy. There may be more resistance once the government is forced to actually put some money away rather than only talking about doing so. But California is at least not in complete denial. And that's better than some other places are doing.