Pension deficit, unfunded accrued liability, whatever you want to call it – by any other name, a turd will still stink

31 Mar

Today I posted a piece sent in by a reader – 

https://chicotaxpayers.com/2020/03/31/will-states-use-covid-19-funds-to-bail-out-pensions/

It’s a good article because it touches on issues related to the pension deficit. I’m afraid a lot of people aren’t worried about the pension deficit because they don’t really understand what it is or what it’s doing to our economy. So let’s dive in.

What is the pension deficit? It’s the difference between what public employees have paid into their pensions and what they expect to get in retirement. In California that difference is well into the negative.

In the late 1990’s, our state retirement agency cut a deal with other state agencies, promising they would fund pensions of 70 – 90% of highest years’ salary with stock market investments, allowing local agencies to negotiate unrealistically low employer and employee shares with the unions. Many agencies negotiated contracts in which the employer would pay the entire employee share. This resulted in very low contributions from employers/employees.

At the same time, many agencies also raised salaries markedly – in Chico, during the early 2000’s, the city doled out raises of 14%, 19%, 22%, for several years running. City manager Tom Lando’s salary, for example, went from about $65,000/year to about $135,000 in just the last few years before he retired. His successor came in at $190,000 and retired in less than a year. The next city manager agreed to work for a paltry $180,000, but his successor, Brian Nakamura, got over $200,000/year, also leaving in less than a year. Nakamura’s successor Mark Orme agreed to an initial $180,000, but now makes over $220,000 with “extra pay”. 

Orme will argue that he’s taken pay cuts – no, he just hasn’t been given a raise in salary for a few years. He will also tell you he’s paying more of his pension – so fucking what? Orme went from having the entire tab picked up by the taxpayers to paying less than 15% of his pension cost out of his own pocket. The taxpayers pick up most of the other 85%, with minimal contributions from CalPERS questionable stock investments. 

The low contribution rates coupled with the irrational salary increases put Chico in deep doo doo. In 2013, Chico employees’ pension deficit was about $168,000,000. When Chico came close to bankruptcy back in 2012, local conservatives pointed the finger at a liberal majority on council, accusing them of bad spending habits, but nobody wanted to talk about exactly what the debt was made up of. The UAL – unfunded accrued liability – is our single biggest debt, far overshadowing any other debt the city is carrying right now.

This is a national problem.  Today, the national pension debit is over $122 trillion. Put that in relation to your life. If you own a home, a car,  really nice clothes, even an extensive collection of Hummel figurines, you are probably not even worth a million.  Well, one trillion is 1,000 times 1 billion. 1 billion itself is 1,000 times 1 million. 

Here’s how I put it into perspective – within my lifetime, Jed Clampett was a millionaire, and that was a really big deal. 

Who should pay the UAL? That’s next time, when we take up the subject of “pension protection clauses,” or, The California Rule. 

 

4 Responses to “Pension deficit, unfunded accrued liability, whatever you want to call it – by any other name, a turd will still stink”

  1. Scott Rushing March 31, 2020 at 5:03 pm #

    Dear Juanita, imagine for a moment the impact on the UAL for government employees that will occur with the 25%-30% decline in the value of stock investments just since March 1st. Scott Rushing

    On Tue, Mar 31, 2020 at 3:31 PM Chico Taxpayers Association wrote:

    > Juanita Sumner posted: “Today I posted a piece sent in by a reader – > https://chicotaxpayers.com/2020/03/31/will-states-use-covid-19-funds-to-bail-out-pensions/ > It’s a good article because it touches on issues related to the pension > deficit. I’m afraid a lot of people aren” >

    • Juanita Sumner April 1, 2020 at 6:00 am #

      Yes, I think this is the tsunami people have been warning CalPERS about for several years now. They say they are weathering this storm okay, but still demand more from member agencies.

      Our city management say we can’t get out – that’s a lie, and we need to press harder.

    • The Internet Is not your HOME April 1, 2020 at 9:24 am #

      spend more outside. please lick your hands

      • Juanita Sumner April 2, 2020 at 5:27 am #

        Scott, this one might be a cop. Let’s not forget former Chico City Police Officer Tod Booth – for every Tod Booth you see scurrying across the rug, there’s another 20 in the floor boards. Same IP number as Mr. Scum

        The Internet Is not your HOME
        shit@yourface.com
        98.208.16.168

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