Archive | November, 2020

Who will pay the unfunded liability? Taxpayers living on a median income of $43,000/year, or well-paid, well-heeled, entitled public employees making over $100,000/year?

5 Nov

It’s been said, the campaign begins the day after an election.  I like to hit the ground running. Here’s a letter I just sent to the ER. 

Butte County, like the city of Chico, is considering a Pension Obligation Bond.

POBs are a financing scheme that allows state and local governments to get the taxpayers to pay unfunded pension liabilities by issuing a bond guaranteed by tax revenues. Like CalPERS, POB proponents claim investments will pay for both the bond and the retirement fund. According to Oregon PERS manager Mike Cleary, “Some people call this arbitrage, but it’s not, it’s really an investment gamble.”

In fact, in 2013, Stockton and San Bernardino went bankrupt. According to the court, “Generous pensions awkwardly propped up with ill-timed POBs contributed to both debacles.”

In recent years, returns on POBs have often fallen below the interest rate paid by agencies to borrow the money, digging the liability hole even deeper. Nonetheless, they remain popular because they are instant money without voter approval.

Chico’s Unfunded Pension Liability has grown enormously over the past year – from $123,000,000 to $140,000,000, with another $146,000,000 interest – because of unrealistic employee contributions. Chico employees pay, at most, 15% for pensions that run from 70 – 90% percent of hundred-thousand-plus salaries. Meanwhile, taxpayers not only contribute a payroll share, but the annual “catch-up” payments come at the expense of city services – this year $11,000,000.

Who will pay the unfunded liability? Taxpayers living on a median income of $43,000/year, or well-paid, well-heeled, entitled public employees making over $100,000/year?

Let your elected representative know what you think of this scheme to leave the taxpayers holding the Pension Deficit Bag.

Juanita Sumner, Chico

Tags: ,

Pension Obligation Bonds: Some people call this “arbitrage”, but it’s really an investment gamble

4 Nov

Wow, what an election. I got most of what I wanted out of it – Prop 15 is dead, Prop 22 won. Doug won. It still looks good for Don. Locally, I have mixed feelings. It’s good to get rid of the liberal majority on council, but no, I’m not glad about a conservative Super-Majority, cause that means we are going to get that Pension Obligation Bond. Hmmm. Pretty sure we were going to get it anyway – the only vocal opposition was Stone, and he has been retired.

So, despite conservative promises that we will get less crime, a cleaner park, and better streets, here’s the thing – if they float that POB, the General Fund belongs to CalPERS and the POB holders. Our streets will continue to degrade, crime will go up, and we’ll never get the park back.

This article, from “Governing,” gives us some historical perspective on POB’s in California. It says what the consultants made very clear to the city Finance Committee – these bonds are risky, even in a good market.

https://www.governing.com/topics/finance/gov-pension-obligation-bonds-risky-or-smart.html

“POBs are a financing maneuver that allows state and local governments to “wipe out” unfunded pension liabilities by borrowing against future tax revenue, then investing the proceeds in equities or other high-yield investments. The idea is that the investments will produce a higher return than the interest rate on the bond, earning money for the pension fund. It’s a gamble, but one that a lot of governments are willing to take when pension portfolio returns plummet, causing unfunded liabilities to run dark and deep.“

Yes, Chico’s Unfunded Pension Liability runs very dark and deep. Just recently, the head of our finance department revealed that we not only have a $140 million UAL, but we owe another $140 million in interest. All this because of unrealistically low contributions by employees, compounded by poor investment returns from CalPERS. Chico employees pay, at most, 15% of pensions that run from 70 – 90% percent of highest year’s salary. Management, the highest salaried individuals in Chico, pay less than 10%, even while boasting that they pay 3% of the city’s share.

Here’s a good credit card analogy – this is like always paying the minimum payment on your credit card, never making extra payments, and then going over your credit limit regularly. In the case of the City of Chico and CalPERS, the city has gone over limit with crazy-generous salaries and benefits, and then ladled on some more trouble by creating three new management positions with $100,000+ salaries in the last year.

Over the last few years, the city finance team has arranged to make extra “catch up” payments, creating a “Pension Stabilization Fund”. The PST takes a percentage of every department payroll, and uses it to make that extra payment to CalPERS – this year growing to $11 million. And you probably wondered why the street in front of your house looks like a section of Downtown Tijuana. Silly you! You need to pay more attention.

This is maddening – our “extra” payments have gone up, up, up – meaning, the taxpayers are paying more, while getting less service. All the while, employee contributions are not going up, just employee expenses. And the UAL recently reported by the city finance man is about $17 million more than what he reported last year – $123 million. In one year, the UAL went up that much. Not including interest. Ever think to yourself, “how the hell did that happen?”

A popular analogy for POB’s is that the city would be paying their Master Card by taking out a new VISA. That is exactly right. Worse – they are investing the money they take from their Visa, hoping to be able to get enough returns to pay off both cards. Like BC said – that’s like taking your credit card to the casino.

This scheme became popular as far back as 1985. At first it seemed to be a good idea, but times changed. “When Oakland, Calif., launched the first pension obligation bond in 1985, it appeared to be a reasonable strategy. It qualified as a tax-free bond that could be issued at the lower municipal bond rates. A state or city could then pivot and invest the funds in safe securities — a corporate bond, for instance — at a slightly higher rate. ‘That was classic arbitrage,’ Cleary (Oregon Pension System Chief) says. ‘You were locking down the difference between nontaxable bonds and taxable bonds.’”

What is “arbitrage”? “Arbitrage occurs when prices for the same product differ between two markets, allowing a nimble player to exploit the difference. ‘Real arbitrage is free money,’ says Andrew Biggs, a scholar at the American Enterprise Institute. ‘But it doesn’t hang around very long.’”

In fact, it ended quite abruptly with The Tax Reform Act of 1986, which prohibited state and local governments from reinvesting for profit the money from tax-free bonds. But the scheme didn’t go away. “When the concept resurfaced, the strategy called for states or localities to issue a taxable bond and leverage the higher interest rate of that bond against higher return but riskier equity market plays. So long as markets boomed, the new tactic seemed savvy. ‘Some people call this arbitrage, but it’s not,’ Cleary says of post-1986 POBs. ‘It’s really an investment gamble.’”

Nonetheless, in the early 2000’s, POB’s became the strategy du jour for cities struggling with pension debt – rather than reform their pensions, they just dug themselves in deeper. Fast forward to 2013 when two California cities, Stockton and San Bernardino, went bankrupt. “Generous pensions awkwardly propped up with ill-timed POBs contributed to both debacles.”

“Over the years, returns on POBs have often fallen below the interest rate the state or locality paid to borrow the money, digging the liability hole even deeper. Nonetheless, they remain popular with politicians in a revenue pinch. Politically, it is easier to borrow money to pay for pension costs than it is to squeeze an already-stressed budget. While many economists and policy analysts view them as risky gimmicks and question the high market growth assumptions that make them seem viable, POBs have defenders who believe that with careful timing they can pay off.“

I don’t think that the proponents of this scam believe it will pay off. Chico City Manager Mark Orme and his Hemet side-kick Chris Constantin know exactly how risky this is. Constantin, in presentations to various city commissions, repeatedly predicts a downturn in the stock market. The consultants who gave the presentation remarked several times that CalTRANS isn’t expected to hit their investment target, not by a long shot – why should POB investments fare any better? I don’t think either Orme or Constantin really care – both of them are nearing retirement, I believe they just want to prop up the pensions for another 5 or 10 years.

For another thing, now that council has a conservative Super Majority, they can put Orme’s sales tax measure on the ballot, thus insuring a taxpayer supported revenue stream to help pay off the POB.

So, now is the time to contact your new council majority and start telling them what you think of this insane scheme to get YOU to pay STAFF’S pension deficit. Do you really think that’s YOUR responsibility? Did you negotiate these contracts? No, you weren’t even allowed in the building when they negotiated contracts this past six months.

Start with Sean Morgan, who voted as a Finance Committee member to forward this crap to the full council. That’s sean.morgan@chicoca.gov

Here’s the real bad news – the county is also looking at a POB!

That’s next time, on “How to Take on a Shit Storm with a Tennis Racket”.

Tags: , ,

Get out and vote – here are some thoughts on my ballot choices

3 Nov

Well, there were so many searches yesterday for election information, I want to talk about the issues that are important to me in this election.

President/VP – Trump/Pence

Congress District 1 – LaMalfa

State Ballot Measures – NO on all except for Props 20 and 22.

Prop 15 – NO – This raises the taxable value of every commercial property, including apartment buildings and farms. More money for schools? You mean, more money for salaries and benefits, not more money for the kids.

Prop 20 – YES – allows judges discretion to decide whether to make felony charges for some offenses decriminalized by AB 109.

Prop 22 – YES – The unions are trying to force part-time workers – like UBER and Insta-Cart drivers – to join the union. Meaning no more part-time, higher rates for customers, and I believe – less people performing these important services that have helped our economy, the environment, and public safety.

In Chico, I can’t vote for my district representative but I’m urging people to vote for Morgan in Dist 1, Schwab Dist 3, and Stone in Dist 5. I don’t have any recommendation for Dist 7, good luck to you folks on that race.

Morgan Dist 1 – I’m not happy that Morgan is pushing forward the Pension Obligation Bond – a tax without voter approval – but, I think Morgan could be pressured to drop this idea. That’s sean.morgan@chicoca.gov

Schwab Dist 3 – Same with Ann, I’m not happy that she is supporting the POB, but I find her to be malleable under pressure, so let’s start pressuring her about that too – ann.schwab@chicoca.gov

Stone Dist 5 – I feel good about this endorsement because Stone not only rejected the POB as a member of the Finance Committee, but he rejected the sales tax measure that Mark Orme wanted on this November ballot. He gave good reasons, whether or not you think he’s sincere, you might want to thank him – randall.stone@chicoca.gov

For Dist 7 I can’t really get behind either of these people. For one thing, they have no real record politically. Ober has served on committees without much distinction. Tandon has never served, I’ve never seen her at the morning meetings, and I’ve never heard anything she has to say aside from promises to clean up the park. I don’t like either of them particularly, but I think Tandon has got a bigger machine behind her, I don’t trust people who take and spend so much special interest money. She’s a Trojan Horse.

Measure E is the most important measure on the local ballot. This is not unlike Measure J, written to legalize the illegal taking of a tax off our cell phone bills. A southern California lawyer decides that every city in California needs to be gerrymandered to give lesser known and lesser supported candidates an edge in city elections. Whereas we all voted for every seat on council, now we are faced with one district representative? How is that good for anybody?

I think it’s telling that this council, when faced with a similar situation – a lawsuit over the illegal collection of a tax on our cell phones – council chose to continue to break the law right up until the voters rejected their measure. The big difference – the cell phone tax issue had already been decided by the state courts. But, sitting council – led by Ann Schwab – chose to continue to collect that tax illegally while asking the voters to make it legal!

Look at the map – see how the line between Districts 3 and 6 jogs over suddenly to take in the Dist 6 rep’s home. These were admittedly drawn around the sitting council members, that’s gerrymandering. And one sitting council member has already told me the districts will be redrawn after the election. Why didn’t they wait to get voter approval BEFORE they drew the districts?

Think Folks, don’t be bullied with the epithet of “RACIST!” A NO vote means the districts are NOT LEGAL and we have to at least go back to the drawing board. Don’t let the Gerrymanderers fool you, this is not a done deal, VOTE NO ON MEASURE E.

Those are the issues I feel are most important in this election. I’m sorry if you don’t agree. I am posting this because I’ve had an incredible number of searches for information in this election, and I’m glad to share my point of view.

 

Tags: , , , , , , ,

Waiting for The Crazy to be over

1 Nov

I can’t remember when I’ve wanted an election over so badly. This is the nastiest election in my memory, especially locally.

I blame the Facebook groups here – both sides are ugly. Rob Berry, Faceblob gadfly, who has worked as an attorney for PG&E, leads the charge with threats of “boobytrapping” his campaign signs to keep thieves away. Rob, you were asking for it there, Buddy. You should have better sense, Mr. Lawyer.

Meanwhile, queen of the bum camps, Jessica McLaughlin, attacks people for having yard signs she doesn’t approve of, giving specific addresses in her anonymous posts on Reddit, and calling out Code Enforcement. This is especially ironic since she vociferously defends the creeps who are breaking the laws in our parks and other public spaces.

Wow – this is what we have to offer the young people of our town? I’m so embarrassed.

Yvonne, I’m sorry your yard signs were taken down, but, judging from your own video, they were posted illegally on the outside of your fence. Both sides are guilty of illegal posting. And, it’s the citizen’s right, sorry Yvonne, to take down and dispose of illegally posted sign. Although, if it were me, I would have put the sign in your yard and left you a nice note with Debbie Presson’s contact info on it.

What a town. Reminds me of the story of Little Black Sambo, a controversial folk tail about bullying. Here’s my analogy – Sambo is the average voter, a guy who’s trying to inform himself about the candidates and issues. On the way to the polling station he runs into a pack of tigers who are circling his city hall building with angry mobs, both sides rabid, shutting down sidewalks, disrupting public meetings with honking horns. They’ve created a hostile atmosphere of total anarchy.

Suddenly, the Chico First, One Chico, Citizens for Safe Chico, and the Stand Up for Chico folks start chasing each other around City Plaza, shouting threats and obscenities and waving signs at each other. As Sambo watches in horror, the howling mobs turn into a river of shit, polluting the entire town.

Sambo moves to Idaho.

And then there’s national politics. It’s so deja vu – 4 years ago we watched Hillary Clinton barking at the crowds about what a disaster a Trump presidency would be. She also attacked Biden pretty viciously – and we can’t help but wonder why she is not supporting him now, along with her dirt-bag wife-cheating husband Bill. And where the hell is Michele Obama? Pissed off because Biden chose Harris? So we have the Barack and Biden show – air bumping their way across the country, with threats of shutting down society as well as the economy.

The press is shameless, I can’t believe the lack of professional journalism. But here’s what I see – the Democrats are so desperate they are trying to play the polls game. The press is presenting one poll after another saying Biden is ahead.

Sound familiar? Cause that’s what we heard leading up to Election 2016. It’s all coming back to me. I was so disgusted with being forced to choose between Hillary and Trump, and no real campaign coming out of my old stand-by, Ralph Nader, I just didn’t vote for President. I went to bed expecting to wake up to Fascism, Hillary-Style.

Boy, was I shocked – it was SURREAL – when my husband woke me out of a dead sleep about midnight to say, “HILLARY CONCEDED!”

I won’t lie, I thought Trump would be a total disaster. That didn’t happen. Instead, according to fact-checked data, the country has more jobs and more people employed, programs in place to ensure better drug prices and more transparency in medical billing, more accountability in the Veterans Administration, reforms to the justice system that ensure fair treatment – read it here:

As I read through this list, I saw stuff I knew was happening without being told. Some highlights:

  1. The 25% lowest-paid Americans enjoyed a 4.5% income boost in November 2019, which outpaces a 2.9% gain in earnings for the country’s highest-paid workers. More than 400,000 manufacturing jobs created since his election. The poverty rate fell to a 17-year low of 11.8% under the Trump administration as a result of a jobs-rich environment. Poverty rates for African-Americans and Hispanic-Americans have reached their lowest levels since the U.S. began collecting such data.
  2. Trump signed a bill this year allowing some drug imports from Canada so that prescription prices would go down.  In the eight years prior to President Trump’s inauguration, prescription drug prices increased by an average of 3.6% per year. Under Trump, drug prices have seen year-over-year declines in nine of the last ten months, with a 1.1% drop as of the most recent month.
  3. He also signed an executive order this year that forces all health care providers to disclose the cost of their services so that Americans can comparison shop and know how much less providers charge insurance companies.  Hospitals will now be required to post their standard charges for services, which include the discounted price a hospital is willing to accept.
  4. Trump created a White House VA Hotline to help veterans and principally staffed it with veterans and direct family members of veterans. He also issued an executive order requiring the Secretaries of Defense, Homeland Security, and Veterans Affairs to submit a joint plan to provide veterans access to access to mental health treatment as they transition to civilian life.
  5. In 2018, President Trump signed the groundbreaking First Step Act, a criminal justice bill that enacted reforms that make our justice system fairer and help former inmates successfully return to society. The First Step Act’s reforms addressed inequities in sentencing laws that disproportionately harmed Black Americans and reformed mandatory minimums that created unfair outcomes. The First Step Act expanded judicial discretion in the sentencing of nonviolent crimes. Over 90% of those benefiting from the retroactive sentencing reductions in the First Step Act are Black Americans. The First Step Act provides rehabilitative programs to inmates, helping them successfully rejoin society and not return to crime.

So, I will be sheltering in place the next few days, got my groceries stocked up, errands run, outside chores done – waiting for The Crazy to be over. Good luck, keep your head down.

Tags: , , ,

Newer Entries →