California Public Pension Bombs Grow Ever Larger as Funds Post Uninspired Returns
Just what Californians needed to hear (via the Los Angeles Times):
The nation's two biggest public pension funds reported meager returns for the last fiscal year, raising the prospects that state and local governments and school districts may have to contribute more toward their workers' retirements.
The California Public Employees' Retirement System [CalPERS] posted a 1% return on its investments for the fiscal year that ended June 30. The smaller California State Teachers' Retirement System reported a 1.8% annual return.
CalPERS needs a 7.5 percent average return in order cover its pension commitments for its members. State and local governments must make up any difference, so devastated budgets will be devastated further. (I have had arguments with retired California public employees who do not grasp/utterly refuse to accept this detail and incorrectly believe their pensions are not a current taxpayer burden. It's akin to trying to argue with retirees who refuse to recognize they're drawing more from Social Security than they ever put in.)
The latest awful pension news adds more steam to the speculation about which cities will be the next to file for bankruptcy. On Saturday, the San Francisco Chronicle noted eight cities that have warned the bond market they are facing significant financial hardships. The watchdog crew over at the Orange County Register have looked at financial reserves of cities in their county and put Stanton on the watch list.
In San Bernardino, City Council is delaying its declaration of fiscal emergency in order to try to actually figure out what happened before filing for bankruptcy. Via The Sun (San Bernardino):
City Attorney James F. Penman said at last week's meeting that 13 of 16 years of budget documents were falsified, then declined to elaborate. Monday, within council chambers again, he and other officials explained what they think happened.
Money was habitually borrowed from restricted funds -- areas of the budget that legally can be used only for certain purposes -- to meet payroll and other expenses during months when cash was short, then repaid as the revenues flowed in later in the year, Finance Director Jason Simpson said.
At some point, Simpson indicated, those internal loans could not be repaid within a fiscal year.
Under questioning from Councilwoman Wendy McCammack, Simpson -- who, like Interim City Manager Andrea Travis-Miller, has only been in office several months -- said other cities do not do such borrowing and that there was no indication of this borrowing in the budget or other documents given to the council.
McCammack said she repeatedly asked officials what the balance was in those restricted funds and wasn't answered.
Penman made the case more explicitly.
"State of California law prohibits cities from engaging in deficit spending. You, the council, were engaging in deficit spending … and the budget did not show that," he said. "You, without knowing it, were acting on false information, misleading information. In my definition, if you have a document that contains false information, misleading information, you have a false document."