Calpers is the culprit, not Prop. 13

Some municipal officials in California are blaming Prop. 13 for their financial woes – when in truth the REAL problem, besides their proclivity for wasting taxpayers money in frivolous ways, is the generous pension spikes they have been handing out for the past few years.

Jon Coupal, the head of the Howard Jarvis Taxpayers Association, shed some light on the pension problem, particularly as it pertains to CALPERS – the California Public Employees Retirement System.  Here are a few excerpts from Coupal’s latest editorial column about this problem:

The California Public Employees’ Retirement System (CalPERS)is now warning California’s cities that they may have to cough up more money to cover the retirement and other benefits the fund provides for 1.6 million state workers, reports the Wall Street Journal. Some communities are already cutting municipal services and they are blaming CalPERS, not Proposition 13. Dan Cort, mayor of Pacific Grove, has been quoted as saying, “CalPERS could bankrupt us faster than anything else.”

According to the Journal, CalPERS has lost almost a quarter of the $239 billion in assets it held in June of this year. Stock market losses are an obvious cause of the fund’s distress, but less well known is that CalPERS makes extensive investments in real estate — investments that have been largely financed by borrowing. Some deals involved as much as 80 percent of borrowed money. While this worked well in a rising market, now that real estate has tanked CalPERS expects to report paper losses of 103 percent on its housing investments for the fiscal year ending in June.

“The use of debt is unconscionable,” County Supervisor John Moorlach told the Orange County Register in commenting on CalPERS’ mismanagement of its funds. Moorlach is the former county treasurer who predicted that the unsound investment practices of his predecessor would result in bankruptcy.

Essentially, CalPERS officials rolled the dice and lost, but the burden will ultimately fall on the taxpayers.

Currently, the average employer contribution rate for public entities is 13 percent of payroll. However, if CalPERS’ assets are down just 20 percent at the end of the fiscal year, it would trigger an increase payroll costs of two percent to five percent, the Journal reports. This could have a major impact on city and county budgets already out of balance, not to mention the state, which now estimates a $40 billion shortfall for the next year and a half.

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"Admin" is just editors Vern Nelson, Greg Diamond, or Ryan Cantor sharing something that they mostly didn't write themselves, but think you should see. Before December 2010, "Admin" may have been former blog owner Art Pedroza.