Cities will no longer be able to hide their financial mischief and unfunded pension obligations in the basement anymore. Those days are now forever gone. To put it in other more official sounding terms, under Governmental Accounting Standards Board No. 68 (GASB), government agencies will soon be required to record a “net pension liability” on all of their balance sheets. Right out there in the open where everybody who cares to can check it out.
These amounts must be disclosed on financial statements issued on or after June 30, 2015. Many local governments have a June 30 year end. Those financials are typically issued in December or January. So by next month the rapidly approaching insolvencies caused by the stupidity of politicians and the greed of public employees will be there for all to see.
Below is a sampling of the sorts of information we can expect to see soon. Californians will then begin to awaken to the fact that they are being ripped off at historic levels. All on the behalf of people who were supposed to be working for them.
Obviously somewhere along the line those tables got turned. Today I have something for each of the three cities this blog covers. Sierra Madre, Arcadia and Pasadena. In their own way each are something to behold.
Yesterday we speculated about what the differences in unfunded pension debt would be for full service cities versus those that outsourced such things as safety services.
Here are a few numbers that show Sierra Madre’s net pension liability is almost 6 times higher on a per capita basis than the liabilities for cities that use the L.A. Sheriff's Department.
Sierra Madre (SMPD): $9,000,000 divided by 11,056 = $814 of city employee pension liability per person.
La Canada Flintridge (LASD): $2,600,000 divided by 20,553 people = $126 of pension liability per person.
Santa Clarita (LASD - never had its own police department and somehow survived): $28,000,000 divided by 179,590 people = $155 of pension and post-employment benefits liability per person.
Here's the big news about Arcadia's pension liabilities. Particularly the unfunded kind, which is the point here. Arcadia’s GASB 68 adjusment may be more than $104 million. Their net position as of June 30, 2014 was $92,167,401. Arcadia may already be insolvent.
So you know, Bankruptcy is when you cannot pay your debts as they come due. Your assets can be larger than your liabilities and still be bankrupt if the assets can’t be used to pay bills. Insolvency, on the other hand, is when your liabilities exceed your assets. If the liabilities are long-term you may be able to continue to operate but the fact is you have been grossly mismanaged.
The unfunded numbers were disclosed in the notes to Arcadia’s financial statements last year (see below). In 2016 they actually have to be booked as liabilities, and can no longer be discreetly tucked away where nobody can see them. Previously, these liabilities have been unbooked and buried in notes to financial statements. Places few living souls ever go.
Now they actually have to be booked as real liabilities. Arcadia only had $92 million in their government fund, with most of that being land, buildings, etc. None of that can ever be spent to pay this liability.
Here are the numbers as unearthed from the dark depths of Arcadia's website.
Pasadena’s GASB 68 adjustment may be as high as $261 to $300 million. Pasadena has a total net position of $450 million in its governmental funds and another $716 million in its business-type funds.
Pasadena: $300 million divided by 139,731 = $2,147 (!) of per person pension and post-employment benefits liability.
What a mess. Remember, La Canada Flintridge had $126 of pension liability per person. Some difference, right? And where would you rather live?
Here is the documentation:
The moral of this story? Outsource everything. As quickly as you can.