Saturday, November 07, 2009

The CalPERS Crush Part 1

The CalPERS financial bomb has gone off. The blast wave hasn't arrived to knock us all down is all. Revenues are falling further, unemployment is out of control. The UE fund is projecting a $23.7b deficit.
Employers, who support the fund through a tax on each worker, are expected to contribute $4.3 billion this year but that is nowhere near the $12.5 billion that is projected to be paid out in benefits. After eking out a $326.2 million surplus in 2008, the trust fund is expected to be $7.4 billion in the red by the end of this year.

Hey, no big deal. Nothing a one time $1500 surcharge for every remaining worker wouldn't cover. Right? The big news however is all the rotting fish at CalPERS. The consulting fee scandal. The ignored overpaying for financial services report. The failure to pursue specific performance clauses. CalPERS now even has a special blog to refute the lies being told about it.

CalPERS "stuff" following is intended to be backgrounder for those interested in saying "I saw all this coming." It's like decoding the Japanese diplomatic transmissions in Nov '41. We know lots of things but it all isn't in one place. THe insolvency crisis is long term. Let's talk liquidity. Because of muni pressures and the rats leaving the ship and a demographic bulge and recent "flexibility" granted end of career calculations a lot more people are retiring than was planned. That on top of a contributor (State, munis, districts) cash crunch that has them not making full contributions. Indeed some are reacting like the US at the United Nations. Years behind full dues. This was okay as long as the CalPERS was raking in cash. Those same years also made the watchmen lax in making sure they could met future promises.
Then the cash squeeze arrives. Lots of the crap on their books is so complex it can't be unwound. The people who set it up are gone and the counterprties are out of business. Trying to sell a large complex security in this market and they honestly won't get fair value. At least they have that part right.

List of $100,000 retirees:
California Pension Reform's 'The CalPERS 100K Club'
Plug in you favorite city/district and read the list. Shocking.

CalPERS resorts to counter propoganda:
CalPERS tweets back at 'misinformation' - Los Angeles Business from bizjournals:
The propoganda itself:
CalPERS Responds
Funny relations:
CalPERS reviewing tie with Apollo Management after steep losses --
More funny business:
He earned $53 million opening doors to CalPERS money --
CalPERS discloses more fees paid to Alfred Villalobos --
Calpers Knew of Foreign-Exchange Trading Hits -

I'm still working on evidence of massive overpaying to retirees and the instances of outrageous double dipping.


w said...

Money and power draws flies doesn't it. The best argument against a bigger government is always the government itself.

Why can't we just limit pensions at 50k a year no matter who you are? If making six figures with great medical and time-off with 50k a year after 65 is so bad then folks can go find a better deal.

It seems like everyone (government health care devotees) is saying that doctors should work hard because they want to help people, but not for the money. Can't we say the same thing about government service?

Lou Minatti said...

But who can afford to live in California on $50,000/year?

Son of Brock Landers said...

Future Gov Jerry Brown probably has fresh, exciting and new ideas to tackle this problem for when he takes office.

EconomicDisconnect said...

In the era of ZIRP, many funds are having rouble capturing the 5-8% return they need. Not long until they go all in into stock indices trying to catch up.

TJandTheBear said...

But who can afford to live in California on $50,000/year?

Circular argument, Lou.

If we didn't outrageously overpay these folks then it wouldn't cost so much to live here.

w said...

A pension of 50k a year with health care is a lot more than the rest of us will get. If they pay their houses off and take advantage of Prop 13 they should be able to avoid dumpster diving. It is not as if they couldn't try and save some of their income for retirement savings like the rest of us have to.

Rocco said...

Your "$50,000/year" comment is frankly offensive, Lou. Please tell us you were joking.

The point is, it's a retirement payment. By definition, you're either RETIRED, or NOT WORKING that job. Either way, you get $50K/yr free and clear. If you're actually of retirement age, then you must have already paid off your home, right? If not, then you can take another job, and then end up with TWO incomes.

I'm really sick and tired of hearing how effin hard it is to make ends meet at $50K/yr in CA and other places like that. Send your kids to public schools, fix your own meals, and stop spending money like you're rich. Fit your lifestyle BELOW your income, and then come back to us about how hard it all is.

Chris said...

Of course Lou is joking. Geez Louise.

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