Bob sent a link to an article from Forbes – Why California is in Trouble” It’s a good read. If you can’t make the link below work, just google the author, Adam Andrzejewski, or “Forbes, Why California is in Trouble” (Thanks Donna!)
The author, Adam Andrzejewski (Angie-eff-ski) is the CEO & Founder of OpenTheBooks.com – one of the largest private databases of government spending in the world. Andrzejewski documents salaries all over the US, and tells us, there are 340,000 public employees in California making over $100,000.
“Our auditors at OpentheBooks.com found truck drivers in San Francisco making $159,000 per year; lifeguards in LA County costing taxpayers $365,000; nurses at UCSF making up to $501,000; the UCLA athletic director earning $1.8 million; and 1,420 city employees out-earning all 50 state governors ($202,000).”
Lifeguards costing $365,000/year? You say, that’s nuts? No, it’s not. LA has miles of public beaches. Just think what would happen if CARD ran LA beaches – yeah, lifeguards would make $365,000/year. That’s what happens when nobody is watching the purse strings, except the thieves.
Right now this man, beaming like a ghoul, is running our town. Did you vote for him?
Chico City Manager (High Dollar Whore) Mark Orme at the CARD Center following the State of the City forum in January. Photo by Ashiah Scharaga
No, he was hired by the pack of ninnies we know as “Chico City Council.” We had nothing to say about his hire, and we have nothing to say about his salary – now $207,000, plus a $56,000 benefits package. We pay that, he pays another $24,000/year, and gets 70% of his highest year’s salary for the rest of his life.
While Orme boasts that he has not had a raise for several years now, he certainly managed to negotiate himself a second pension – a 457 plan, which is a special kind of 401K for public workers. Orme wormed the city into paying $10,000 a year into that fund, PLUS 4.5% of his salary. In addition to the money paid toward his CalPERS pension and health benefits.
That is why not only Chico is in trouble, but our entire state is in horrible financial straits – over generous salaries, and a crazy retirement scheme. CalPERS clients are paying less than half the cost of these pensions, with employees contributing little or nothing, but expecting to get 70% of their ridiculous salaries, with COLA, for the rest of their lives.
Ex Chico City Manager Tom Lando, for example, retired at about $134,000/year, but now makes about $155,000 – IN RETIREMENT. That’s the “cost of living adjustment” . He also gets himself hired for various interim positions – like city manager of Oroville – and those salaries add to his pension. That’s why Lando was the first one to raise the notion of a sales tax increase for Chico, and used his own money to pay for a survey to push it. He also donated $6,000 to the Yes on Measure A campaign for CARD’s parcel tax. Lando knows better than anybody that CalPERS must be funded, or he’s out $155,000/year and counting.
Essentially, CalPERS has led the taxpayers to a room full of straw and is demanding we make enough gold to keep our public workers like a pack of high-dollar whores for the rest of their lives.
Right now, the city of Chico is working behind closed doors, using ConVID to keep us out of the tax measure conversation. They’re spending taxpayer money on consultants to write the measure and strategize the campaign, just like CARD.
Don’t be discouraged by the remote meetings. I won’t recommend Chico Engaged, I’ll say, write to council members directly, and tell them we resent them spending taxpayer money on a sales tax increase when they’ve done nothing to reform the pensions and contracts.
I’ve been busy with a lot of stuff, but like I promised, I wrote a letter to the ER about Robert Koyasaki’s “Pension Time Bomb” series. I’m embarrassed – I mis-spelled Siedle through the entire post, I have to go back and fix that, sorry. But I think I got a good letter out of it – you tell me.
Cities across America, like Chico, are unable to provide basic services because all the money is going to pay for pensions. No matter how much money the taxpayers pour into this system, pension expense will continue to outstrip revenues.
Salaries are excessive. Chico city management positions pay four to five times the median income.
The city pays too little, with employees contributing even less. Until the Public Employee Pension Reform Act of 2013, management employees paid nothing toward their pensions. Now they pay between 10 and 15% of total cost, the total payment being 20 – 30%.
Pension deficit is created by agencies and employees that don’t pay enough on payroll. The excess becomes the Unfunded Actuarial Liability. Employees contribute nothing toward the UAL, which is over 65% of total employee cost. The California Rule mandates that the pension deficit must be paid ahead of everything else. For example, our finance director says we have no money to fix streets, but in July he will make the annual $9 million (and growing) payment toward the UAL.
A tax measure would be spit on the griddle in this situation. Here are my suggestions:
Negotiate lower salaries for management, or hire somebody else
Get all new employees off CalPERS, switch to 401Ks
Pay more in payroll, which would mean, ALL employees would have to pay more, even based on their current shares.
Pre-PEPRA employees should have to pay toward the UAL, or “catch up” payments – they should pay the same shares they pay toward the payroll portion.
Listening to Robert Koyasaki’s Pension Time Bomb radio show made me so mad I had to take a break. But I finally finished the discussion between Koyasaki, a real estate investor, economist Edward Seidle, and Phoenix Arizona city council member Sal DiCiccio.
DiCiccio explained that cities across America are unable to provide basic services because staffers are pouring all the taxpayers’ money into their own pensions. Because of excessive salaries, ridiculously low contribution rates, and horrific mismanagement of pension funds, the pension deficit, or Unfunded Accrued Liablity, ” will continue to climb. No matter how much money the taxpayers pour into this system, pension expense will continue to outstrip revenues.
First of all salaries excessive – our city manager, for example, at $207,000/year in salary, makes almost 5 times the median income in our area. Many economics experts, including Seidle, have said that if the salaries were more rational, the pension system would work.
Second, agencies pay too little, with employees contributing almost nothing. In fact, until Orme started paying in a few years ago, he was paying NOTHING. His predecessors, like Tom Lando, Greg Jones, Dave Burkland, and Brian Nakamura, paid nothing. Lando is now getting over $155,000/year in pension, plus COLA, having made absolutely no contribution for his entire career.
These agencies have used CalPERS like a credit card, and now they want us to pay. First of all, the agency doesn’t pay enough in total. As of now, the city of Chico is paying, depending on the employee group, between 20 and 30% of total payroll cost, with employees, also depending on bargaining group, paying between 9.75 and 15%. Finance mangler Scott Dowell said in his power point presentation that “City of Chico employees are paying, or are nearly paying, HALF of the CalPERS pension costs.” That is one of the Big Lies. See, he forgets to mention, the Unfunded Actuarial Liablity, or “pension deficit”, which is over 65% of total cost, and the taxpayers pick up that whole tab, with interest.
That UAL is created by agencies that don’t pay enough on payroll, and don’t require enough of their employees. The money they don’t demand becomes the pension deficit, and then the employees are off the hook to pay it. They contribute NOTHING toward the pension deficit, or UAL, payments, the taxpayers are stuck with the whole turd.
And then there’s mismanagement of funds. CalPERS is our pension system. They have been criticized for promising too high a return from the stock market, especially since they make horrible investments. They tell their member agencies they only have to pay so much, and then when their investments tank, they come banging on the door for more.
DiCiccio and Seidle explain that no agency requires any member of their pension boards to have any financial credentials or education – the boards are made up of union members. These people are completely dependent on Wall Street money managers.
DiCiccio says, “The wall street money managers are screwing everybody,” from the taxpayers to the employees. He gives an example, which is verified by Seidle – one Phoenix employee group paid $40 million to their money manager for a $4 million return on their investments. Seidle adds, “In the last 10 years the fees have grown exponentially because they are doing high cost high risk investments, which have much higher fees.” And there he also mentions the high risk investments – in one case, CalPERS board members were caught buying bad stocks off of friends.
So, what can we do? Unfortunately, we can’t just stop paying our taxes, that’s not going to go anywhere. Also unfortunate – most states, including California, have passed legislation that protects the pensions of those members hired before 2013. “The California Rule,” passed by the state legislature behind closed doors, says, in fact – we must pay the pensions before we pay for anything else.
Last night, watching Chico City Council’s latest remote meeting, I saw it right in front of my eyes. It was in the report Dowell made to council at last night’s remote meeting. He showed council that list of services that $taff plans to cut. One cut that was taken off the list since he made the same presentation at last week’s Finance Committee meeting was deferring payment of the annual Unfunded Actuarial Liability. That is an annual payment, the penalty for missing it would be about $355,000 in late fees. But last night Dowell said there was plenty of money to make that payment in the General Fund – $9 million. That’s just this years payment, up about $1 million from the payment I saw in last year’s budget.
Dowell, Orme, Constantin and the Public Works staff have acknowledged for about 5 years now that they have not been funding street maintenance or repairs, but they’ve never missed a UAL payment. If that’s not Mutiny folks, I don’t know what to do with my yardarm.
So here are my solutions to this mess:
Get all new employees off CalPERS and give them 401Ks
The city of Chico needs to pay more in payroll, which would mean, all pre-PEPRA employees would have to pay more, despite their ridiculous shares.
Pre-PEPRA employees should have to pay toward the “catch-up payments” or “UAL” – they should pay at least the same shares they pay toward the payroll portion.
Retired employees making more than $(??,???) per year in pension should have to contribute or lose benefits.
Thanks Dave, for sending me the link to this ongoing discussion about the Pension Time Bomb.
Robert Kiyosaki, entrepreneur, author, and radio show host, just published his latest book (co-author Ed Siedle) in January, “Who Stole My Pension? How You Can Stop the Looting” .
In this five radio part series, he speaks with his co-author, Ed Siedle, and his local city council member Sal DiCiccio (Phoenix, AR) how public pensions are ruining our economy.
Kiyosaki states what should be obvious, “This pension thing is very suppressed, people don’t know much about it. If you think COVID is big, the pension failure will be bigger.”
Yes, we’re being misled as to the enormity of the problem by public $taffers that put their own interests first. Chico City Manager Mark Orme and his Ass City Mangler Chris Constantin, along with “Services Director” Scott Dowell, have walked a tight rope – they tell us we need more revenues but they won’t say why. Even when they tell us that revenues have been ahead of budget, they keep saying we don’t have enough money to maintain infrastructure. If you pay attention, you see what Kiyosaki and his guests are saying – the city gets more revenue every year, but it’s just never enough.
Phoenix AR council member Sal DiCiccio says it very plainly. “If you see more revenues coming in to your city, and you keep wondering why your roads are looking like crap, and you believe you’re not getting the type of services you should be getting, it’s the pensions. Every city and state is on the same plan. Phoenix is a growing economy but we still have crappy roads because more and more money is being sucked into government pensions.”
Regardless of whether you live in a “right to work state“, DiCiccio explains, the unions elect all the politicians, putting millions into elections every year.In Chico the biggest donors are the Chico Police Officers Association and the Service Employees International Union – SEIU was the biggest single contributor to CARD’s ill-fated Measure A, and CPOA president Jim Parrott ran the campaign pac.
DiCiccio says “We’re becoming a pension machine, and they’re making the cities unliveable.” Next time we’ll talk about why. And get ready for the next installment in Kiyosaki’s series – “Kentucky Fried Pensions.” You can see more at his website,
Oh for cripe’s sake, another letter from the Measure A people. Like a friend of mine has observed, they are still really mad they didn’t get this measure past the voters. I was hoping they’d just stomp their foot and disappear through the floor, but you can bet they’ll be back in 2022.
Great and timely article in the Sunday, April 5 Enterprise Record regarding “No Sports.” For those of us who sports and athletics is such a large part of our lives it is hard to not get our daily “Sports Fix.” We know professional, collegiate, high school and other amateur sports will resume as we recover from this COVID-19 Virus. Our hearts go out to those directly infected with the virus and all of us indirectly affected by staying home and not participating in work or athletic activities. It is a good time to reflect on why Measure A failed and how to move our local recreation and sports programs forward.
In the beginning I was in favor of Measure A. Over the course of the campaign I changed my opinion that the measure would fulfill our facility and program needs. There are too many reasons to cite in 250 words for the failure. No sunset and a CPI were two along with few specifics on what facilities were needed and would be provided by the parcel tax if passed. CARD ignored half of the electorate when they planned the measure.
We need to analyze what facilities are really needed and what programs need to be re-energized and focused on. The October 2018 facilities assessment study should have done this but did not. It was an overall marketing study of the amateur sports market with two of the three proposals being private/public partnerships with no explanation by CARD.
— Terry Cleland, Chico
Cleland is right about the the “no sunset” and annual increase with the Consumer Price Index – the measure was bad. He is also right about the lack of specifics – the measure promised nothing, except more revenues for CARD to spend as they pleased.
But he left out the bond measure – General Manager Ann Willmann admitted several times that the parcel tax proceeds were not nearly enough to pay for any of the over-the-rainbow projects mentioned in the Measure A campaign. Willmann said they would use the parcel tax proceeds to secure a $30-something-million bond, the debt service for which would have cost $2 million a year while only providing $1 million for projects. A million dollars a year? Let me put that into perspective – several years ago, the city of Chico spent a million dollars “upgrading” the public restroom at One Mile. Get it?
Cleland also neglected to mention the pension deficit, or the fact that a simple majority measure goes into the General Fund, to be spent at the pleasure of the board and staff. He wouldn’t admit – the salaries and pensions at CARD are not sustainable, that they have bottomed out the General Fund to pay down the deficit created by their employees’ unrealistic and unreasonable “shares”. Willmann admitted many times they had deferred maintenance while paying their pensions.
I feel Cleland is trying to nudge the conversation away from the fact that CARD is poorly managed and is not fulfilling their mission statement.
Cleland attended CARD General Manager Ann Willmann’s “informational” propaganda sessions. He heard her tell the group that CARD is without debt, and he sat right behind Dave Howell as he corrected Willmann. Howell quoted the latest figure on CARD’s Unfunded Pension Liability as $2.7 million, because that was the figure Willmann had recently given the Enterprise Record. She admitted to him and the rest of us that it is actually over $3 million. How does it grow so fast? Because, only 5 years ago, agency management was paying NOTHING toward their own pensions. CARD was paying, in total, less than 10% of the cost. These agencies have put off paying the pensions, because they expect the taxpayers to foot it.
As of 2017 Willmann was only paying 2.5% of the cost of her pension, with an annual salary increase, that’s why CARD’s deficit is growing so quickly. As of 2019, she was paying 8%, with another salary increase, up to $127,000/year.
If you want to see the consequences of this kind of pyramid scheme, read the latest CalPERS “actuarial valuation report” for CARD.
Just type “Chico Area Recreation District” into the search engine.
Look at what CalPERs will expect CARD to pay in “catch up” payments within the next few years – and then remember, the taxpayers pay ALL OF IT, in addition to half the payroll contribution.
And here’s another lie Willmann floated to the public during her little propaganda blitz – she said that CARD has no control over the shares or amounts they pay to CalPERS. “this needs to be handled at the CalPERS level and the legislative level…” she lied.
Here’s two holes in that lie –
If it’s out of the agency’s hands what they pay to CalPERS, why are the city of Chico and CARD’s payments so radically different? CARD pays 14%, while the city of Chico pays 21 – 31%. You can see the city even negotiates different payments for different employee groups, as well as very different shares per employee group.
According to the report linked above, “The employer contributions in this report do not reflect any cost sharing arrangementsyou may have with your employees.” There’s the truth – Willmann told the public at those sessions that the board doesn’t have any control over the shares. Liar.
Okay, here’s where it gets even murkier – Willmann claimed in those sessions that her 8% was more than half of the agency’s cost – she bragged about that repeatedly. But, when I asked her, in front of the rest of the group, why the city and CARD pay totally different percentages, she would not answer me in the meeting, saying she needed to check her figures. No, it was because she didn’t want to tell the others the truth – her 8% is not MORE THAN half of what the agency pays, it’s not even half. She admitted to me via email later, the agency pays 17%. “The Total Normal Cost is then split in to the Employee Contribution Rate and the Employer Normal Cost Rate. I was incorrect regarding our Total Normal Cost, it is currently 17.127% for our classic members not 14%.”
Why did she tell everybody else CARD only pays 14%? Obviously, Willmann knows the truth, she knows she pays less than half, but misleads the public, because it’s in her best interest to do so.
And, here’s the real pig sticker – the taxpayers not only pay over half the payroll portion, but make the entire “catch up” payments on the resulting Unfunded Accrued Liability.
So, in answer to Mr. Cleland, I’ll say, before I would even consider a revenue measure for this sad little agency, I would demand the following (and this is just for starters) :
new general manager
Tom Lando off the board
ratify a new agreement with employees that they work toward paying more of the agency’s payroll costs (a LOT more)
ratify a new agreement with employees that they will pay the same “share” toward the “unfunded liability”, or “catch up” payments
Meanwhile, we do need to poke our legislators to dump the California Rule, and to start dissolving CalPERS and working toward a more sustainable pension system for our certainly needed but much overcompensated public employees.
Next time we’ll apply the same argument to the City of Chico, who may not be discussing their one cent sales tax increase measure in front of the public right now, but I assure you they are planning to put it on the 2020 ballot. You can find the same actuarial report for the city at the website I linked above, just punch in City of Chico.
Now that Congress has passed its broader humanitarian aid packages in response to the COVID-19 virus, it’s likely that the nation’s most fiscally irresponsible states will request bailouts for something completely unrelated to the virus: their bankrupt pension plans.
Bad as that may be, it’s likely some sort of assistance will materialize from Congress. If that happens, any support should be conditioned on pension reform.
It’s not a stretch to think that federal money will somehow find its way into the nation’s most dysfunctional pension plans. New Jersey’s Phil Murphy, governor of a state with one of the worst pension crises in the country, is seeking a multi-billion-dollar, flexible block grant. Meanwhile, Chicago Mayor Lori Lightfoot, whose city is already junk rated largely due to pensions, has warned “this is a B-sized problem, meaning something that can only be solved with billions in needed stimulus support from the federal government.”
With the shortfall in pension funds exceeding what Stanford’s Pension Tracker says was $5 trillion even before the meltdown, you can bet those governments most mired in pension debt will seek additional help. They could demand direct aid for their state and local pensions, or for their own operations that indirectly support those pensions. But states and cities that bankrupted their funds through corrupted governance long before the current crisis shouldn’t get a free pass.
Many states, including Illinois, New Jersey and Connecticut, have refused real reform for decades, wreaking havoc on their residents and the retirement security of their workers. That’s reason enough to require preconditions for any federal support.
The rationale for requiring reforms with any aid is threefold. First, supporting irresponsible states with no strings attached is fundamentally unfair to those states that have already enacted major reforms. Second, structural reforms reduce the risk of future federal bailouts by setting those states on a path toward stability. Third, requiring reforms would reduce the cost of any potential federal aid to those states.
Illinois is a perfect example of a state that shouldn’t be bailed out at the expense of fiscally responsible governments. Gov. J.B. Pritzker, the state legislature and Chicago Mayor Lightfoot all reject structural pension reforms that would fix Illinois’ problems. They continue to block efforts to amend the state’s pension-protection clause through a constitutional amendment and they refuse to authorize the option of municipal bankruptcy, something that only requires a legislative majority.
Instead, like their predecessors, they’re protecting the status quo. As a result, Illinois’ Net Primary Position – basically its net worth – has worsened by $190 billion since 2001. Those losses resulted primarily from growing unfunded pension and retiree health insurance liabilities. Illinois’ pension crisis is now the nation’s worst, both in terms of total shortfall and on a per capita basis, according to Moody’s Investors Service. The agency rates Illinois just one notch away from junk.
Conditions in New Jersey are no better. The Garden State’s pension funds were flush at the turn of the century, but since then, gross bipartisan mismanagement and pension holidays have led to near insolvency. S&P warned in June of 2019 that: “[The state’s] inability to contribute [its] annually determined contribution after 10 years of national economic recovery raises questions about what could happen in another recession.”
Connecticut is also swimming in unfunded pension and retirement health care debts. Those obligations equaled nearly 40% of its GDP in 2018 – the highest among all states, according to Moody’s. And like Illinois, the state has resorted to decades-long reamortizations and is considering asset transfers instead of real, structural reforms.
If that’s not evidence enough, consider this. In 2018, the plans for Chicago’s 30,000 active and retired public safety workers were just 22% funded. The funding for Kentucky’s 90,000 state workers was even worse, at just 16%. And the plan for New Jersey’s 136,000 public employees was only 32%. All those workers lost their retirement security due to politicians’ corrupt practices long before the current crisis.
The unwillingness of such states to make hard choices on their own is precisely why any help from the federal government must come with preconditions.
Defined contribution plans, cost of living reforms and increased retirement ages are all part of the suite the federal government should require. And for states that have constitutional protections, lawmakers must commit to removing them or lose out on aid.
Whether the federal government eventually provides direct aid to state and local governments remains to be seen. However, it’s imperative that any such support not be used to bail out pensions or enable irresponsible states to further ignore their retirement crises.
Ted Dabrowski is a former international managing director for Citibank and current president of Wirepoints, an independent, nonpartisan research and news organization focused on fiscal and economic policy.
Mark Glennon, a former bankruptcy lawyer and venture capital investor, is executive editor and founder of Wirepoints, an independent, nonpartisan research and news organization focused on fiscal and economic policy.
I couldn’t believe staffer Brendan Ottoboni had the nerve to propose a discussion about an ice skating rink on the city’s new comments mechanism “Chico Engaged!” He and other staffers told the assembled contractors, landlords and other concerned citizens that the city has no money to fix existing streets, or even maintain them properly. “Chico Engaged” is inappropriate – it’s a way for staffers and others with gain to be made to sprinkle little ideas in the public head – like rainbows and lollipops, and skating rinks. It also gives the public the idea that council is listening – oh yeah, they’re listening, they’re listening to the public being duped.
I had to write a letter about the crazy contradiction between a city that has no money to fix streets or maintain the park but seems to have plenty of money to throw at gimmicks like “Chico Engaged” and ice skating rinks.
At a morning meeting Downtown, Public Works staffer Brendan Ottoboni stated there is no more money to maintain or fix city streets. He said streets that had been on the repairs list for years were being taken off due to lack of funds.
So why would Ottoboni propose an ice skating rink on “Chico Engaged!”?
Look at the agenda for council’s 10/15 meeting – Council will discuss giving management employees a raise while putting a one cent sales tax measure on the 11/2020 ballot. When a city doesn’t even have the money to perform the most basic of services, why even consider giving raises to people already making four times the median income?
Chico has over $138 million in pension liability. Staff recently established the completely restricted “Pension Stabilization Trust”, and this year have transferred over $1.2 million from other funds into the PST. Employees pay 15% or less of “their share,” paying nothing toward the PST. The sales tax increase, a simple majority measure requiring only 51% voter approval, will go into the general fund, available for salaries, benefits, and the PST.
Tax measures are being proposed all over California to fund pension packages that were never approved by voters, made by elected officials who receive donations and other political support from employee unions. The taxpayers even pay for the consultants who guarantee to get the measure passed.
Coincidentally, a tax measure consultant told City of Chico Finance Committee, “We offered them (Heavenly Valley) a skating rink…” and the measure passed.
