Friday, December 11, 2015

More CalPERS Mania: Are Pasadena City College's Pension Liabilities Driving It To The Financial Brink?

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As we were talking about just the other day, under Governmental Accounting Standards Board No. 68 (GASB), government agencies will soon be required to record a “net pension liability” on their balance sheets.

The liability is the difference between the total pension liability and the value of the assets that have been set aside to pay benefits to current employees, retirees and their beneficiaries.

It also requires the recording of interest on that liability, which is also information the man in the street wasn't getting to hear too much about previously. Chances are good that your local government agency was none too willing to share this kind of information with you, either. After all, this is mostly about your money going into their pension funds, so why would they want you to know anything about that?

As was confirmed at Tuesday's City Council get together, that amount for Sierra Madre is more than $9 million. Which should be disturbing to most because on June 30, 2014, Sierra Madre had a total fund balance of $11,131,838.

Sierra Madre’s adjustment will wipe out 80% of its fund balance. This balance in City Hall's governmental funds, which is the amount by which assets exceed liabilities, will dramatically fall from $11 million to only $2 million. A precipitous decline in financial fortunes that suggests a possible near future insolvency.

Won't the taxpayers be pleased to see that their money was so horribly misspent?

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However, Sierra Madre is hardly the only government agency around looking at possible insolvency like it was a semi-automatic rifle barrel pointed straight at their worried nose.

This will become quite obvious as more local government agencies, forced by these new GASB 68 reporting requirements, reveal just how financially at risk publicly funded CalPERS employee pensions have left them.

And just so you know, we won't have to wait until next year because we have a candidate right now. The CPAs for Pasadena City College revealed on Wednesday evening that PCC’s GASB 68 adjustment is $111 million big ones, reducing PCC's fund balance in one fell swoop from $160 million to $50 million.

No news yet if they're selling the world famous Shatford Library to help meet the payments. These same CPAs are also stating that many other local government entities are reporting that their liabilities exceed their assets in available governmental funds.

So yes, it has begun.

One more thought. As more CalPERS challenged cities are forced by GASB 68 to reveal their dire financial straits, won't it be interesting to see what types of government agencies are the most vulnerable? What do you think, will the majority of these financially strapped cities be full service ones like Sierra Madre and Pasadena? Or will they be cities that contracted out for things like public safety services? La Canada Flintridge and San Dimas being good examples.

You have 10 full seconds to make your bet.

I'm telling you, 2016 is going to be quite an interesting year.

Who signed this CalPERS document?

You might have seen this document in the stack of various staff reports prepared for Tuesday's Sierra Madre City Council meeting. It deals with some 2012 amendments to the CalPERS structure, some of which resulted in even more money being used to help pay government employee pensions.

Here's a portion of this doc:


It goes on like that for a while. If you want to see this in its entirety you may do so by clicking here.

So who signed this CalPERS document, effectively pulling the neck of Sierra Madre further into the financial noose it finds itself today?


Credit where credit is due.

sierramadretattler.blogspot.com

48 comments:

  1. How many people really understand all this stuff. You make it relatively simple to most, summarizing things. Union people get paid good $$ to keep their interests at stake (and they've done a damn good job - look where things appear to be headed city after city). It's kinda funny that more of this will soon be transparent, some people must be losing sleep over this, which means in my mind it is shady to begin with. Short term gains for long term loss is such a stoopid way to do business. How many of us individuals in Sierra Madre would run our household finances the way the City has? But you put a bunch of people together and somehow it became acceptable to operate this way? Why??

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    1. Here's the simple version of CALPERS:
      It is a Ponzi scheme.
      It will end the way all Ponzi schemes end.Misery and loss for many innocents,comeuppance for a few.Foreseeable outcome but no action by Govt. Why? It is their way of getting votes.An unholy alliance of Govt and Public Unions.And a devilish penalty for the rest of us.

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  2. While it is good that the new GASB rules make reporting on this kind of huge pension debt mandatory, why wasn't it done before? Maybe things wouldn't have gotten this bad if these rules had been put in place earlier?

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    1. Things are worse than anyone knows.

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    2. It was never in the interest of the public employees, their unions or free-spending politicians for the real truth to get out there.

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  3. Grumble, grumble ... Buchanan! [Shakes fist] BUCHANANNNN!!!! grumble, grumble....

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    1. A one man wrecking crew.

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    2. Well said, 6:05 and 6:08.

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  4. Off topic, but this is The Tattler. Rumors are flying about that John Harabedian will not be running for reelection. He has a lot on his plate professionally, or so the rumors go. Has anyone heard this as well?

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    1. I've heard that, and I've also heard that he's running.
      Ya know, rumors.

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    2. Johnny H will run again. As an elected official of even tiny Sierra Madre, he has political capital. To tell people "I used to be an elected official"means you either lost or quit which gives you zippo political capital.

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    3. I think he knows how bad things are and doesn't want to be there when the (blank) hits the fan. Dealing with that disaster is not going to be a whole lot of fun. This city has been run into the ground.

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  5. You can't make promises that you can't keep. Its unsustainable. We must move to defined contribution pension plans that have to be budgeted for each year rather than defined benefit pension plans that are used as a piggy bank by politicians to pay back the unions for their political support and where the bad consequences don't manifest themselves until long after the politicians that made the promises are long out of office. Case in point is that Gray Davis did as Governor of California. He paid back his union supporters, kept the peace and now we have the unfunded pension liability crisis. If you really want to understand this stuff read the book by Steven Greenhut called: "Plunder: How Public Employee Unions Are Raiding Treasuries, Controlling Our Lives and Bankrupting the Nation." That is the bible for understanding the union tactics. Look at your property tax bill. Rather than trying to defeat Prop 13, they are adding line items to our property tax bill like fees for emergency services, paramedics, schools, or the library. All that does is free up money so that the public employee can get increased salaries, benefits and pensions. Wake up! Do not vote for any tax increase ever.

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    1. "... adding line items to property tax bill like fees for emergency services, paramedics, schools or the library." You mean like they're talking about in Sierra Madre? Of course, that would come after the UUT/CalPERS tax passes next April.

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  6. No wonder the unions wanted Selinske elected so bad.

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    1. So glad that ham lost.

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  7. Thank God for Howard Jarvis and Prop. 13. How freaking high would our property taxes be now if we didn't have the Prop. 13 limit? grandma would have lost her house by now, fer sure.

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    1. We would all lose our houses without Prop 13.

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  8. I just don't have the time to read all this right now but I will say this, people do need to save for their latter years when the body starts giving up the ability to work and the bills need to be paid, Period.It's not the workers fault the leadership has failed to keep pensions in control. Right along with that, the people in charge of running the funding have done horribly and are costing more money to be needed, again this is poor management of pension funds, funds people are counting on in their later years. Remember, it's not the workers, it's the management who are not being properly directed. This can go on and on but do look at all the facts Mr.Crawford and fans, you all have done a lot for the community's but please get all the facts out and not concentrate on making the problem worse. I have to go .. . . .

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    1. How does bringing a problem out in the open make things worse?

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    2. Moron at 8:46, just ask Trump.

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    3. Had to go, huh? Not the employees fault? You don't think they back and push whatever the union wants? You must be one of them.

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    4. Ask Trump what?

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    5. Ask Trump what 9:35 has been smoking.

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  9. So, since the cat is out of the bag, when will the taxpayer hire a city council and city manager that can resolve these issues? The residents are getting in the shorts!

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    1. Come up with a candidate and we'll work to get her/him elected.

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  10. 8:48, why only bring out half the problem, come on, dig deeper and have the respect to the workers to tell why the pensions need more money. I'd say more but I'm headed into LA, cost a lot to work in southern calif.

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    1. The "need more money" hit to Sierra Madre is $400k. That is a lot of what are calling respect.

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  11. Dump bloated defined benefit plans and switch to a defined contribution plan. Its the only path to solvency. Employees will work just as hard, maybe harder, with a 401k and 3% or 5% city match. Or they can quit and a new crop hired.
    Sure there will be anxiety, turnover, possible lawsuits. But better to rip off the band-aid now and let the healing begin while there is still a city to be save.

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  12. Once these numbers start hitting the news things are going to change. They won't be hidden any more.

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  13. Sadly I disagree that knowledge that comes from exposing the truth will change anything. There are too few of the electorate to fight this and win for common sense . So it will run it's course - down the same hole all bad things eventually go.
    When the financial house of cards collapses many of us will be penalized egregiously.

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    1. It is still good to know. If El Nino is the Godzilla of weather, this is the Godzilla of government financial disaster.

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    2. Somebody wants us to wear unicorn blinders.

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  14. As the political cartoon points out, welcome to the machine. All good pigs will be eaten alive and then required to give more except the politician's who invented this MACHINE and are also receiving their fair share of monies.

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  15. This comment has been removed by a blog administrator.

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    1. Momma's right, 1:06. Try and redraft your post in such a way that you do not offend Momma.

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    2. Don't you go upsetting Momma now.

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  16. For those who blame CalPERS for The San Bernardino and Stockton bankruptcies, here' something from letstalkpensions.com:

    Stockton’s bankruptcy wasn’t caused by the city’s police officers and garbage truck drivers, but from a combination of circumstances and decisions including lavish borrowing to construct a waterfront ballpark and entertainment center. In San Bernardino, pension costs last fiscal year totaled just 4 percent of its budget shortfall. That means even if pensions were eliminated entirely, San Bernardino would still have had a $43 million budget hole.

    In a recent ruling criticizing Wall Street creditors in the Stockton Bankruptcy case, U.S. Bankruptcy Judge Christopher Klein agreed that the bankruptcy was not driven by pensions, saying a host of decisions and circumstances led to the city's financial woes including developments and tax breaks that could not be sustained because of the housing crisis and recession.

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    1. You're full hoot, dude.

      Stockton bankruptcy judge calls California pension fund a 'bully'
      BY ROBIN RESPAUT
      Feb 5 The judge overseeing the city of Stockton's bankruptcy case in California described the country's largest pension fund as a "bully" yielding an "iron fist," in a written ruling that reiterated his oral confirmation of the city's plan to exit Chapter 9.

      U.S. Federal Bankruptcy Judge Christopher Klein's ruling again staked out ground for bankrupt municipalities to alter their workers' pensions, a contract that the California Public Employees' Retirement System had ferociously argued could not be touched. Stockton, however, elected to leave its pensions intact.

      "CalPERS has bullied its way about in this case with an iron fist insisting that it and the municipal pensions it services are inviolable. The bully may have an iron fist, but it also turns out to have a glass jaw," wrote Klein, who orally confirmed the city's plan to exit Chapter 9 protections in October.


      Read more at Reutershttp://www.reuters.com/article/usa-california-stockton-idUSL1N0VF2J620150205#17Svif7OP1lCl4xX.99

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    2. A bully? Oh boo hoo! As I commented last week:

      "As to Stockton, you may wish to read the opinion, which, while perhaps slapping CalPERS down a bit with respect to its actual stake and standing in the Stockton BK proceedings, ultimately did not reduce the pensions of the city workers."

      It's usually better to read source docs, 7:00, lest you get caught up in journalistic sensationalism.

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    3. Whatever you say.

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    4. http://calwatchdog.com/2015/12/09/calpers-board-accused-bullying-deceit-flouting-laws/
      CalPERS board accused of bullying, deceit, flouting laws
      Dec 9, 2015
      Chris Reed
      A member of the CalPERS board has gone rogue, using public records laws to get documents from the agency while facing warnings that it is unacceptable for him to criticize staff at board meetings.

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  17. Yeah, so a member of the board supposedly does some bullying. That's your rationale for not honoring contracts with SM employees and other CalPERS members?

    Congratulations! That's one of the weakest straw man arguments I've ever heard.

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    1. To say that you have completely missed the point would be generous.

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    2. The point of the comment at 12/11 6:50pm was that pensions were NOT the reason for the Stockton and San Bernardino bankruptcies, as some have implied.

      7:00pm responded with CalPERS is a bully, and 5:39am (you?) added that a CalPERS board member has gone rogue.

      Neither of those comments has anything to do with the point that pensions were not the causes of the bankruptcies, and neither of those comments provide a rationale for dishonoring contracts with government employees.

      So I don't think I missed the point, considering the point--pensions did not cause those BKs--was raised by me in the first place.

      As an aside, the bankruptcy court judge's comments that CalPERS was a bully because, gasp!, it vigorously asserted it had standing and a stake in the matter were nothing short of gratuitous. Large corporations often exhibit even more "zeal" and often without legal cause, but you'll rarely if ever see a judge call big corporations bullies for doing so.

      Perhaps the bankruptcy judge, knowing he does not have an Article III lifetime appointment, made the gratuitous comments to ensure that corporations that will be paying him $1,000 per hour once his judicial gig is over will see him as tough on unions and workers' interests.

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    3. Yes. But what relevance does that have to anything being discussed here? Is Stockton in the SGV? Do you know! It is like you are trying to create some kind of nonsense argument for some reason.

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    4. Because SB BK has been raised here before, implying not only BK as a viable solution for the CalPERS obligation but also that the obligation is a cause. Likewise, Stockton was raised for the big, bad CalPERS bully meme. Just want people to know that pension obligations were not the problem in those cities.

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