BANKRUPTCY, PENSION, AND TAXES
The California Public Employees' Retirement System lives in the rarified air where
financial magic somehow materializes to pay for their irrational exuberant pensions. When
the drug high is over, the real world requires a harsh penalty for ebullient
irresponsibility. The Chicago
"San Bernardino, a city of 210,000 about 60 miles east of Los Angeles, filed for
bankruptcy protection on August 1. Since then, it has halted its bi-weekly, $1.2 million
payment to Calpers, saying it wants to defer any payments to the fund until fiscal year
2013-2014. Calpers says the city is already $6.9 million in arrears since August 1.
The San Bernardino bankruptcy is fast emerging as a precedent-setting case over how
creditors, especially Wall Street bondholders and insurers, are treated in a municipal
bankruptcy, because never before has a city seeking bankruptcy halted payments to Calpers
or threatened its historical primacy as a creditor.
Under Californian state law, the contract between Calpers and debtor cities is viewed
as inviolate and has been treated as such by state courts. Unlike Calpers, other creditors
have historically been forced to renegotiate or forgive debt to debtor cities."
The concept of an inviolate obligation tied to public employee retirement payouts is a
sacred cow that needs purging from law and, more importantly from populace endorsement.
Notwithstanding, expressing such supportive government orthodoxy,
that bastion of objective news as reported by the Sacramento Bee, writes on the pro
taxation argument of Jerry
Brown: California tax vote start of national tax hike sweep.
"Revenue means taxes, and certainly those who have been blessed the most, who
have disproportionately extracted, by whatever skill, more and more from the national
wealth, they're going to have to share more of that."
The Democratic governor's remarks follow passage last week of Proposition 30, his
initiative to raise the state sales tax and income taxes on California's highest earners.
According to Governor Brown the expanded role for government programs and, by
inference, public employee unions, is never ending. Just ask the taxpayers who live in San
Bernardino if they are paying enough. Next, ask the municipal bond creditors, who stand to
lose significant capital from the forthcoming bankruptcy.
Defining the extent of the self-inflicted injury, California:
Anatomy of an exploding government obligation, reveals an alarming example of the cold
hard truth why the state is financially broke.
"A promise to pay a retiree's health care coverage is essentially a
kind of defined benefit plan, in which government pledges to cover a certain percentage of
the cost of health insurance regardless of how much money it has actually set aside for
this benefit. As the State Budget Task Force's recent report on California explains, right
now workers covered in California by this retirement benefit are earning credits that
should be financed to the tune of $4.7 billion a year, if California is going to have
enough money to pay off this obligation over the years.
But instead of pre-funding the benefit, California has chosen to pay for it on a
pay-as-you-go basis, taking the cash for the health insurance premiums of retirees right
out of its annual budget. Right now that's only costing the state $1.7 billion annually
because of the limited number of retirees who qualify for the benefit. But over time more
and more workers will qualify, and those workers will live on average decades in
retirement, swelling the rolls of those whom California must provide health coverage
Where in the present distressed economy are there new corporate employment contacts
that include defined benefit plans? The old name is a pension. In the corporate world,
IRAs and 401 K are common. The dinosaur companies that accepted union contracts with
future defined benefit obligations are out of business, either escaped offshore or are
hanging on by their fingernails.
Why should government employees have a privileged position, when the realities of
further municipal bankruptcies are growing daily? It seems that Governor Brown forgets his
and Public Unions cites a quotation from the current California governor.
"Several unions have agreed to larger employee contributions for their
members. Taxpayers are living with cuts and making sacrifices to deal with the reality of
California's budget crisis, state workers are going to have to do the same." Jerry
Another quote referenced in a Public Employee Unions Guarantee National
Bankruptcy article, also confronts the unrealistic mindset that exists in "The
Golden State". Someone needs to explain to public officials that the state has
used up their precious metal riches and their union members are not willing to do the hard
labor of mining new veins of revenue benefit reductions that will balance their budgets.
"The Assembly Public Safety Committee today is considering one of the most
noxious, special-interest pieces of legislation weve seen in a whileone that
will endanger public safety, tread on the California constitution and reinforce the
perception that some government workers are part of a special, coddled group thats
exempt from the normal legal and ethical standards that are applied to other
Californians." The Registry
In this same BATR essay the Steven Greenhuts critique in the
Employee Unions Are Sinking California, is emphasized. California legislators inhabit
the same psychotropic mental escapism, exemplified with the double dippers that create the
public employee entitlement culture. Financial reality never hits the retirement paychecks
of the civil service sector, while the tormented taxpayer is told they must pay more.
The rush to leave
the state has Californians perplexed for solutions as long as the Sacramento progressive
refuse to challenge the public union mafia. Those who remain will bear an even higher tax
burden to feather the nests of the most unproductive elements in society, namely
Governor Brown preaches. "And everyone is going to have to realize that
building roads is important, investing in schools is important, paying for the national
defense is important, biomedical research is important, the space program is an indicator
of the world leader - all that takes money". Just maybe a bankrupt state and
municipalities needs to reduce the size and scope of government itself.
SARTRE is the pen name of a reformed, former political
operative. This pundit's formal instruction in History, Philosophy and Political Science
served as training for activism, on the staff of several politicians and in many
campaigns. He is a past columnist for Ether Zone.
"Published originally at EtherZone.com :
republication allowed with this notice and hyperlink intact."
SARTRE can be reached at: BATR@batr.org
We invite you to visit
his website at:BREAKING ALL
the December 9, 2012 issue of
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