April 20, 2020
Feasting on the taxpayer
On
April 6, 2020, the Huntington Beach City Council voted to give pay raises to
city employees, including police officers. The estimated cost of
these raises is $5 million over the next three years. Huntington
Beach reported general revenues of $188 million in the fiscal year ended June
2019 and also reported total revenues exceeding expenses by $25 million for that
same year. Chicken feed, right?
FYE
June 30, 2019, the city collected $89.1 million in property taxes, $47.4
million in sales taxes, $18.8 million in utility taxes, and $14.0 million in
transient occupancy taxes. What will these revenues look like over
the next few years? No one voted on these raises — just one
bureaucrat giving another bureaucrat a raise with other people's money
entrusted to their care.
The
city of Riverside is proposing floating a bond issue to cover the exorbitant
costs of public servants' pensions. Bonds are a double tax — you
must pay interest on the bond and then pay the bond back. A recent
study by Stanford University found CalPERS underfunded by $1.4 trillion.
April
16, 2020, 22 million Americans filed for unemployment due to the catastrophic
slowdown caused by the Wuhan virus. This same week, California
governor Gavin Newsom proposed giving all illegal aliens $500 for assistance in
taking our jobs.
Two
weeks ago, the government added 16,000 to the tax-funded payroll and increased
the number of H-1B visas. Just whom are our "public
servants" working for? California highway patrolmen routinely
retire on $100K-plus pensions, California sheriffs and deputies retire on over
$200K, firemen well over $100K. Mark Yudoff, chancellor of the U.C.
system, just retired with a tax-funded pension of $337,000 after seven grueling
years. How long do you have to work to get your $300K-plus
pension? Keep those tuition payments coming! U.C.
chancellor Janet Napolitano plans to retire this year, again after seven years
(this must be the magic number for exploiting the taxpayer), and her pension
should exceed $400K, as she is paid over $500K now. In 2016,
Napolitano outsourced 100 tech jobs to India and laid off 100 UCSF I.T. workers. The
president of UCSD is paid $441K plus benefits.
In
2018, Curtis Ishil, head of the California Public Employees Retirement System
(CalPERS), stepped down. Today, he draws $418,608 per year, the
largest of more than 700,000 pension checks issued last year. Some
35,598 worth $100,000 or more were issued last year according to data from
TransparantCalifornia.com.
The
average American makes $60,000 per year and most of the time with no
benefits. Are you getting the idea here? Don't live in
California? Not your problem? Think again: the State of
California spent over $320 billion last year, and $106 billion of that comes
from the federal government.
How
did we allow our "public servants" to become so much more equal than
the rest of us? The hogs are truly in the farmhouse. The
people we hire and elect to ensure our equality and protect our rights are the
same people who are depriving us of equal treatment and our
rights. They have become elitists and have placed themselves above
the fluctuations of the economy we have entrusted them with. Until
they are forced to live by the same laws, rules, and regulations they impose on
"we the people," we will never return to a representative form of
government.
Our
"public servants" have turned into greedy, self-serving tax
parasites. Are we still a constitutional republic as our Founders
intended, or have we become a progressive socialist state? Hello,
Venezuela.
THE LOOTING
OF AMERICA:
BARACK
OBAMA AND HIS CRONY BANKSTERS set themselves on America’s pensions next!
The new aristocrats,
like the lords of old, are not bound by the laws that apply to the lower
orders. Voluminous reports have been issued by Congress and government panels
documenting systematic fraud and law breaking carried out by the biggest banks
both before and after the Wall Street crash of 2008.
Goldman Sachs, JPMorgan Chase, Bank of America and every other major US
bank have been implicated in a web of scandals, including the sale of toxic
mortgage securities on false pretenses, the rigging of international interest
rates and global foreign exchange markets, the laundering of Mexican drug
money, accounting fraud and lying to bank regulators, illegally foreclosing on
the homes of delinquent borrowers, credit card fraud, illegal debt-collection
practices, rigging of energy markets, and complicity in the Bernie Madoff Ponzi
scheme.
The Next Looming Economic Contagion: Pensions Collapse
As
the stock market implodes in response to COVID-19, there is an underlying economic virus
that will soon be evident: America's grossly underfunded
pensions. With the market down 40% in from its high point (before
rebounding March 24), many corporations may default on their pension
promises. consumption and thus gross sales will decline (further
dampening corporate profits), and the widespread weakness of pensions will be
exposed. This in turn will cause a vicious cycle in which retirees
and those planning retirement will have fewer disposable dollars and will
divert more money to retirement savings — further weakening consumption and
undermining the effectiveness of interest rate adjustments by the Federal
Reserve.
The
problem of underfunded pensions has been loudly proclaimed for
years. It is hard to ignore article titles like "The Coming
Pension Crisis Is So Big that It's a Problem for Everyone" ( Forbes, 5/20/2019 ), "'Their house is
on fire': The pension crisis sweeping the world" ( Financial Times, 11/17/2019 ), and "Pension
Plans for Millions of Americans Are on the Brink of Collapse" ( NPR, 11/28/2018 ).
Yet
these warnings have been ignored. Now we must
face the consequences.
America
is on the brink of a realization of just how much corporations and legislatures
have "planned for the best, in denial of the worst." In
both corporate boardrooms and legislative budget-making, employees will look
back and see that what has been done is nothing short of fraud. But
it's too late now — we cannot roll back the investment clock.
Left unchecked, this crisis will decimate the
retirement future of millions. Over the years, the number of retirees has grown
dramatically, while the number of active participants and employers has decreased. This imbalance,
combined with the market decline from the Great Recession, has put many of
these vital pension plans on an unsustainable path[.] ... To make matters
worse, the Pension Benefit Guaranty Corporation (PBGC) multiemployer program,
the funding backstop for plans that have run out of money, is also projected
to collapse by 2025 . The
dissipation of the PBGC would leave retirees with about 2% of what they had
counted on for retirement[.] ... The collapse of the entire system would
further compound the pension crisis at hand and have a domino effect on our economy,
potentially leading to widescale business closures, layoffs and rising
unemployment.
The
current decline was foreseen — and the warnings ignored. The
imminent implosion will quickly exceed all municipal defaults in U.S. history
combined. Worse, state pensions are some of the greatest offenders
in playing "kick the can" with beneficiaries' contributions. Legislators
everywhere have played this game of promising costly benefits to unionized
state labor organizations (especially teacher unions) and then diverting
required contributions to other budgetary preferences using unrealistic predictions
of returns on existing investments, accounting gimmicks, and absurdly low
estimates of future benefits.
When states and local governments reduced their
employer contributions to their public pension funds during the Great
Recession, they in effect borrowed from those pension funds. If
governments hope to meet their contractual obligations to their employees, they
must pay these delayed pension contributions back at some point.
But
most states did not pay them back . This analysis from the Federal
Reserve Bank of Cleveland addresses the legal recourse of pension beneficiaries
when the state lacks the financial resources to keep its word in a time of
crisis:
[O]ur legal system provides judges with the
flexibility to adapt broad constitutional principles to the extreme and exigent
necessities of their times. In such times, federal courts typically
defer to states' "police" (sovereign) powers, a decision which
essentially allows the state, as a sovereign entity, to resolve an issue as it
sees fit. The US Supreme Court has made a similar ruling, deciding
that "[t]he contract clause must be construed in harmony with the reserved
power of the State to safeguard the vital interests of her
people. Reservation of such essential sovereign power is read into
contracts." In other words, when "vital interests"
are at risk, defending contracts may be of secondary importance. [A]
state may have all the legal authority it needs to shed its insurmountable
liabilities and force its creditors to accept any deal it offers.
What
remains now is to ponder the extent of the federal bailout that will be granted
to employees whose pensions are evaporating before their
eyes. When Sears sought bankruptcy protection , the PBGC undertook to
step in for some 90,000 employees . How many can
it rescue now, even with a federal infusion of
cash? The present situation promises to be exponentially larger.
If
President Trump is the voice seeking aid for private pensions, Nancy Pelosi and the Democrats will likely
strangle a rescue plan or try to attach socialist conditions. But
how much money would be required for the federal government to also rescue
underfunded state pensions?
In
June 2019, the Pew Charitable Trusts provided a 2017 snapshot of state pension
shrotfalls:
[T]he pension funding gap — the difference
between a retirement system's assets and its liabilities — for all 50 states
remains more than $1 trillion, and the disparity between well-funded public
pension systems and those that are fiscally strained has never been greater[.]
... In 2017, the state pension funds in this study cumulatively reported a
$1.28 trillion funding gap[.] ... Even after nine years of economic recovery,
most state pension plans are not equipped to face the next downturn.
A
serious hurdle to a federal rescue is this moral hazard — states that had been
most neglectful in funding their pensions would have the most to gain.
Whichever
way this shrinking pie is sliced, there will be only crumbs for retirees and
workers. The coming economic whirlwind is going to pick up
this Dorothy's house of pensions
neglect, and no one knows where it will land.
Democrats to seek aid for troubled union
pensions in next relief package
|
April 01, 2020 12:01 AM
House Democrats
planning a new and sweeping economic relief package to respond to the
coronavirus say they’ll include federal aid for troubled union pensions.
Democrats have just
begun drafting the relief bill, which they said would include enhanced family
paid leave, more money for food stamps, and new worker safety requirements.
The pension bailout, if
included in the measure, could cost tens of billions of dollars if it matches a
pension relief package the House passed last year.
Speaker Nancy Pelosi, a
California Democrat, told reporters she believes President Trump has signaled
interest in aiding troubled pension programs but that it was excluded from the
$2.2 trillion package signed into law last week because Senate Republicans, led
by Majority Leader Mitch McConnell, did not want it in the bill.
“President Trump was
actually supportive, but Mitch McConnell was not,” Pelosi told reporters. “And
so, he said we'll save it for the next bill. Well, here's the next bill.”
House Democrats earlier
this month introduced an economic relief package, but it was rejected by Senate
lawmakers, who negotiated the $2.2 trillion bipartisan deal with the Trump
administration.
The sidelined House
proposal included the language in the House-passed Butch Lewis Act, a
multiemployer pension bailout measure with a nearly $100 billion price tag. It
would provide low-interest loans to the nation’s most underfunded union pension
plans to help them stave off looming insolvency, and it would provide an
additional $71 billion in direct cash assistance to those struggling pension plans.
The measure would help ensure pension benefits for 1.3 million workers.
Pelosi did not indicate
this week whether the draft of the new economic relief bill will include the
Butch Lewis Act, but a Democratic aide confirmed it, acknowledging the plan would
have to be bipartisan.
“Our proposal is the
Butch Lewis Act, but, more importantly, we need and want multiemployer pension
reform that works,” a senior Democratic aide told the Washington
Examiner . “We are not so committed to an approach that we can’t negotiate a
solution.”
The House-passed bill
won support from dozens of House Republicans, but it never received
consideration in the Senate.
The plan has generated
opposition from some economists who argue it does nothing to address the
underlying flaws in the pension programs that now threaten their solvency.
About 125 multiemployer
pension plans will become insolvent in the next two decades, and some will go
broke in the next few years, the Congressional Budget Office said.
“It’s a way to kick the
can down the road, and you are using a lot of taxpayer money,” Rachel Greszler,
a research fellow in economics, budget, and entitlements at the Heritage
Foundation, told the Washington Examiner .
Greszler pointed to a
Sept. 6 letter from the CBO that warned of the looming collapse of many union
pension plans, even if Congress passes a pension bailout.
“About one-quarter of
the affected pension plans would become insolvent in the 30-year loan period
and would not fully repay their loans,” the CBO wrote. “Most of the other plans
would become insolvent in the decade following their repayment of their loans.”
Greszler said it would
make more sense for the federal government to shore up the Pension Benefit
Guaranty Corporation, or the PBGC, which is also headed for insolvency, and to
put in place reforms to help pension plans survive, such as a slight reduction
in benefits.
Democrats and many
Republicans said Congress has no choice but to act to stop the pensions from
becoming insolvent.
The vast majority of
union pension plans are grossly underfunded and will have to cut benefits to
retired workers without federal help.
Congress last year
passed legislation to protect the pensions and healthcare for 92,000 mine
workers.
Senate Republicans also
introduced their own multiemployer pension reform plan they said is “designed
in a balanced way to avoid tipping more plans into a poorer-funded condition
and also to avoid exposing taxpayers to the full risks associated with the
largely underfunded multiemployer system and pushing the PBGC into insolvency.”
The measure was authored by
Senate Finance Committee Chairman Chuck Grassley, an Iowa Republican, and
Health, Education, Labor, and Pensions Committee Chairman Lamar Alexander, a
Tennessee Republican.
“We need to act
quickly, but we can’t just pour money into failing and mismanaged funds,”
Grassley said. “Our plan will provide relief and reform now. Without it, our
retirees will be left without the future they worked for.”
The AFL-CIO opposes the
Grassley-Alexander plan, arguing it puts too much of the responsibility on the
unions by requiring them to provide much higher premiums to the PBGC.
“This document contains
no federal financial assistance whatsoever,” AFL-CIO officials said in a
statement. “Contrast this to the over $700 billion that the government provided
to the banks and Wall Street in 2008 and other corporate tax giveaways in
recent years. It is punitive in nature, imposing hefty new costs that even
healthy plans will be unable to survive.”
Democrats will have to
negotiate a bipartisan solution with the Senate, which is run by Republicans.
They'll also have to convince McConnell, of Kentucky, that any pension bailout
belongs in a new coronavirus relief measure.
"I’m not going to
allow this to be an opportunity for the Democrats to achieve unrelated policy
items that they would not otherwise be able to pass," McConnell said
Tuesday on the Hugh Hewitt show.
Report: States Face $1
Trillion in Unfunded Liabilities
States are facing more than $1 trillion in
unfunded future liabilities related to health and life insurance benefits for
their retired employees, a growing shortfall that amounts to about $3,100 for
every person in the United States, according to a new report by the American
Legislative Exchange Council (ALEC).
ALEC, which has come under attack by
left-wing advocacy groups in recent years, describes itself as “the nation’s
largest nonpartisan, voluntary membership organization of state legislators,
with more than 2,000 members across the nation.”
Its mission is “to discuss, develop, and
disseminate model public policies that expand free markets, promote economic
growth, limit the size of government, and preserve individual liberty.”
The new study , the latest in an annual series from ALEC’s Center for State Fiscal
Reform, comes after critics have complained for years that cash-strapped states
don’t adequately fund their retiree-related obligations, which has allowed
those sums to accumulate.
Its authors say that, “in the end,
government must be held accountable for its actions.” Without policy changes,
these liabilities could lead to future tax increases or force cuts to core
public services in states.
Making governments use “more prudent
actuarial assumptions and increasing transparency prevents state governments
from making impossible promises and allowing unfunded liabilities to
accumulate,” the report states.
These unfunded benefit programs for retired
public employees fall under a category that fiscal analysts call “other
post-employment benefits,” or OPEB. OPEB excludes public pension plans but
includes benefits to retired workers such as health insurance, life insurance,
supplemental Medicare insurance, and more. The study examined 132 OPEB plans
from fiscal 2013 to 2017, drawing on the most current Comprehensive Annual
Financial Reports (CAFRs) and Actuarial Valuation Reports.
“While a trillion dollars is a rounding
error in Washington, D.C., at the state level, it’s a huge threat to government
programs and taxpayers,” Jonathan Williams, chief economist and executive vice
president of policy at ALEC, told The Epoch Times in an interview.
Jonathan Williams of the American
Legislative Exchange Council. (Courtesy American Legislative Exchange Council)
“Governments, if they want to spend more
money on new programs, need to view OPEB liabilities as a threat, so I think
there is something for both parties to like from tackling these liabilities.”
Public pensions have generally been
prefunded at 80 percent in order to be considered healthy, “but now a lot of us
are thinking 100 percent is better.” OPEB items, by contrast, have generally
not been prefunded at all, he said.
“OPEB liabilities have flown under the
radar, but they have become more visible as a result of federal accounting rule
changes that force states to list them on their balance sheets,” Williams said.
Even so, they have been “overshadowed” by fiscal problems in Detroit and Puerto
Rico.
“Unfortunately, this new transparency has
left us with these very huge liabilities,” he said.
The states with the largest OPEB
liabilities are California ($166.6 billion), New Jersey ($130.4
billion), New York ($129.3 billion), Texas ($115.7 billion), and Illinois
($64.4 billion), according to the study. The states with the smallest OPEB
liabilities are Nebraska and South Dakota, which Williams said are tied at zero
because they don’t pay for retired employees’ health care, followed by Kansas
($285,000), Oklahoma ($9.1 million), and Utah ($210.9 million).
“There is a lot of doom and gloom in the
report,” but there are also a handful of states that are doing a good job
getting a handle on their OPEB liabilities, Williams said.
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