Skip to comments.CA: State loses legal battle over pension bonds
Posted on 07/03/2007 9:08:41 PM PDT by NormsRevenge
Gov. Arnold Schwarzenegger's administration on Tuesday lost a long-running court battle over its plan to sell bonds to cover the state's public employee pension costs.
The ruling by the 3rd District Court of Appeal could complicate negotiations over the state's already overdue budget. Republican lawmakers are holding up the $104 billion spending plan in part because they believe it will leave California with an unmanageably large budget deficit next year.
Tuesday's ruling may only add to that concern, depriving the state of more than $500 million to help close the estimated $5 billion-plus deficit in the 2008-09 budget year.
Schwarzenegger and Democratic leaders have proposed balancing the current, 2007-08 fiscal year budget with billions of dollars from a prior-year tax windfall. That money will run out by the time officials begin drafting the budget that begins on July 1, 2008.
Consumer rights and anti-tax groups praised Tuesday's ruling. They said it set an important precedent limiting the state's ability to borrow money to pay ongoing expenses without voter approval.
"If they had gotten permission to do this, we could have seen massive deficit spending," said Harold Johnson, an attorney for the Pacific Legal Foundation, which fought the bonds. "It's a big victory and a sobering message for the spendthrifts in the Legislature. They can't use the credit card to cover ongoing costs of government."
Former Gov. Gray Davis' administration designed the pension bond plan.
In 2004, Schwarzenegger endorsed the plan. He proposed paying a portion of the state's annual contribution to the Public Employee Retirement System with money raised from a $560 million bond sale.
Schwarzenegger's administration argued the state did not need voters' approval to do so.
But a three-judge panel on Tuesday upheld a lower court ruling that said voters - or two-thirds of the Legislature - had to approve the use of bond money to pay the state's pension obligation.
H.D. Palmer, spokesman for Schwarzenegger's Finance Department, said the administration would not appeal the decision to the state Supreme Court.
The administration did recently prevail in another court case involving welfare payments that would have cost the state about $500 million. However, California's nonpartisan legislative analyst calculates the state faces $2 billion in potential costs from other ongoing court battles.
Retire from the state of California, then, because you’re still in your 40’s, take on a private job so you can double dip on your retirement.
I remember when public service was public service, not an easy way to make money.
I remember the old days when people shunned government jobs for the lucrative private sector.
Our local city government is constantly trying to dodge their responsibility to have enough liquid assets on hand to cover their liabilities for pension, overtime and vacation owed to the employees. I've had to remind them a few times that it isn't their money to spend.
“It’s a big victory and a sobering message for the spendthrifts in the Legislature. They can’t use the credit card to cover ongoing costs of government.”
Former Gov. Gray Davis’ administration designed the pension bond plan.
In 2004, Schwarzenegger endorsed the plan.
The problem with socialism is that one eventually runs out of other peoples money. - Margret Thatcher
HaPPy 4th of July to you, calcowgirl!
FRom the LAO’s May Revision for 2007-2008 budget
Additional Risks Warrant More Caution
Every annual state budget has some legal uncertainties, potentially higher costs, and revenue estimates subject to downward adjustments. Yet, even after accounting for the overly optimistic assumptions discussed above, there are other risks and pressures contained within the administrations proposed 2007-08 budget plan whichif occurwould put it out of balance.
- Legal Issues. Since January, the state prevailed at the appeals court level for a case involving California Work Opportunity and Responsibility to Kids (CalWORKs) grants. However, the case has been appealed to the California Supreme Court. In addition, the state faces a number of other court cases with sizable fiscal liabilities. For instance, the state is currently on the losing end of cases involving the constitutionality of a fee on limited liability corporations, the manner in which the state handles unclaimed property, and the states reduction of a required payment to a fund for retired school teachers. In total, these legal risks could exceed $2 billion (primarily of a one-time nature). In addition, the state is currently dealing with a variety of federal lawsuits related to the correctional health care system. While the budget plan includes many costs associated with these lawsuits, the full magnitude of the associated costs remains unknown.
- Revenue Assumptions. As discussed in the education section of this report, the lower-than-expected 2005-06 property tax receipts by school districts is not yet fully understood. If this reduction continues in the current and budget years, the state would be exposed to $660 million in additional costs. This amount is in addition to our lower property tax forecast based on the real estate outlook. In addition, as noted earlier, the level of revenues that would be received by the proposed sale of EdFund is subject to uncertainty.
- Retiree Health Unfunded Liabilities. Like the vast majority of governments across the country, the state has not funded the estimated costs of future retiree health benefits as they accrue. Instead, the state uses a pay-as-you-go funding system where costs are paid as benefits are used by retirees. As a result, the state has a large unfunded liability for the benefits that are earned now but will be paid for later. On May 7, 2007, the State Controller released the states first actuarial valuation which identified this unfunded liability as totaling $47.9 billion. In order to fully fund retirees future benefits and eliminate this liability over the next three decades, the state would have to begin setting aside an additional $1.2 billion annually. These amounts will grow each year that the state continues its pay-as-you-go approach. Our estimates do not account for these higher costs that will need to be paid at a future date.
And then they start borrowing. :-(
And when they hit their debt limit, they enter into Public Private Partnerships.
We've almost hit bottom.
Now it’s the public sector that’s lucrative. Guaranteed pension, often at 100% of salary and loads of perks like health insurance for life. Public pensions are bankrupting county governments, they’re the reason that our roads can’t won’t be fixed, because nearly every dollar the county takes in goes to fund the pensions.
Happy Independence Day to you too! And aren’t you the bearer of bad news! lol.
Seriously, thanks. I hadn’t had a chance to go look at what those additional pressures/liabilities were that were mentioned in the article. It’s all too depressing.
Any bets as to when Arnie can’t call them fees anymore and calls for a tax increase? What a schmuck he is.
Pensions often at 100%. Which cal public employees are you referring to?
The head of a Santa Cruz county unified fire district retired at 50 years old, 100% salary, I’m told.
Well I can see where you think that is “often.” I can give you some old examples and some current high numbers, but 100% is not often.
When the judicial is forced to implement policy with which you agree.
that is before the unions moved in.
Seriously, thanks. I hadnt had a chance to go look at what those additional pressures/liabilities were that were mentioned in the article. Its all too depressing.
Any bets as to when Arnie cant call them fees anymore and calls for a tax increase? What a schmuck he is.
Don't sweat the details,, take a foreign junket and relax. :-)
I can't wait for the fireworks. Developing .. as Drudge might say. ;-)
Eric Tucker examines a 12 inch, 35-pound fireworks projectile on a barge in the Charles River in Boston, Sunday, July 1, 2007, in preparation for the annual Fourth of July celebration. Tucker has orchestrated firework spectaculars for the Olympics, Super Bowls, Disney World, and Rolling Stones concerts. But he is perhaps best known for synchronizing 20,000 pounds of pyrotechnics with the musical score of the Boston Pops, and making it look effortless. (AP Photo/Michael Dwyer)
Please tell me which group of public employees can retire in their forties?
I would like to know which unions are getting 20 years times 3% at any age.