Posted on 04/21/2010 8:26:25 AM PDT by TigerLikesRooster
Sacramento County's ballooning deficit: What happened?
By Robert Lewis
Published Wednesday, Apr. 21, 2010
In just two months, the projected shortfall in Sacramento County's general fund budget for the coming fiscal year has ballooned by 40 percent – from $119.1 million to $166.5 million.
Nearly 750 county workers lost their jobs last year to the budget ax; hundreds more – as much as 10 percent of the remaining work force – are on the chopping block this year. For workers facing layoffs and scores of county residents, a basic question resounds: Why do things look so much worse now than they did in February?
County budget officials cite several factors. Chief among them: the increasing burden of employee pension costs; the hidden expense of laying off workers; and the lingering effects of accounting gimmicks used to paper over this year's deficit.
"It is just one big guess," said Tom Burkart, the county's budget officer, discussing the challenges officials have trying to make accurate projections during volatile economic times.
Personnel costs way off
Personnel costs account for the biggest growth in the projected deficit: $23.8 million.
In February, officials said cost-of-living adjustments and other negotiated raises would cost the general fund $44 million in fiscal year 2010-11. That estimate didn't take into account increased pension costs.
Officials now project the cost will be closer to $68 million.
(Excerpt) Read more at sacbee.com ...
P!
Sounds a bit like: “We can’t afford to go broke!”
The answer is very simple (as it is all over the country; especially in DC) corrupt Liberals, suffering from Liberalism (a mental disease), have destroyed our government and our country wherever they slither. CA, like many other states, has an overabundance of these amoral Elitists.
That's what I call a good start.
Everybody sing: Yes, we don’t have no money, we don’t have no money today.”
Something smells like 17 day old rotting Mackerel about this pension problem.
There have been public pensions for decades. This isn’t anything new. Why all of a sudden, are the pensions the reasons governments are going belly up?
Were these government entities not putting away funds to service these pensions? Were they robbing the funds to pay for liberal crap?
What gives here?
You’d think public pensions were something that just came along in the last three years or something.
I don’t like to see anyone lose their job, but in many instances these are jobs they should never have had.
My guess is that decent public workers are losing their jobs, and those that serve the liberal agenda, are safe as can be.
It’s like when cities have a shortfall of funds, they go for libraries, police, and fire. They know these entities will be favored by the populace, and they can raise taxes.
thus is the demise of most of our state and municipal systems - pensions - both union and public.
I think pension obligation grew dramatically since decades ago. In recent years, many local governments dipped into risky financial instrument(derivatives) to earn enough revenue to keep the pension fund going. Now that those schemes all crashed, they created a big hole in the budget.
Several things:
1. Too many pension funds assumed a 7 to 8% return/yield as a long-term average. They didn’t expect (nor were positioned to handle) severe market downturns back-to-back such as we’ve seen in 2001-2003 and 2007 to now.
2. Yes, they were putting away funds, but not enough. The actuarial mathematics behind these pension funds has been, um, “cooked” for awhile now. The contributions have not been high enough for at least a decade.
3. Recent pay scale adjustments, coupled with increased pension benefits negotiated by unions have thrown previous expectations of pension draw-downs into the trash can. As the pension trust funds have realized this, they’ve been going through their actuarial mathematics and re-computing a lot of things with points 1, 2 and 3 now in mind... and they’re coming up with results of “Holy crap! We’re running out of money!”
There was no “robbing” per se of the pension funds. There were some grossly inept and stupid investments made by some funds (CalPERS comes to mind first and foremost), but no direct theft of which I’ve read in the last year. Just a whole lot of chickens coming home to roost all at once.
Thanks to both of you for the responses. I agree with both of your takes on this.
I was raised to be very suspicious about unions. I grew up in the mid-west of our nation, and my grandparents spending time in the Michigan / Chicago region of our nation, were aware of some of the worst aspects of them.
To say there is no love lost here for unions on my part, is an understatement. I have made this clear, because I need to address the issue of retirees getting the funds they worked decades expecting to receive in retirement.
While it bothers me that these public entities are having to pay out these sums, those funds were promised. People accepted the promises of the employer and worked toward a goal. I believe that some of these people worked for government entities under non-union circumstances.
Now that these people are retired, they can’t go out and earn a new retirement, these governments use them as the butt of the excuses.
While California was doubling the state budget in a short period of time, they were hiring new people, spending more money, just throwing it around like it grew on trees. There was no fiscal responsibility.
Now when the people have spent their productive lives, and are not capable of going out an earning a salary any longer, and after some of them opted not to contribute to Social Security, because the government promised them an income during retirement, the government wants to make the case that they don’t deserve what they are getting.
Well, maybe they don’t, but that’s not their fault. An agreement was made. Now it must be honored.
I don’t like it when the private sector tries to do an end run on pension promises, and I don’t like it when the state does it earlier.
People who prey on the elderly are the lowest life forms IMO. And that’s really what this boils down to.
Yes, and every one of these investments were deliberately rated AAA by the ratings agencies who should have known better.
So you have pension funds all over the USA and Europe that bought junk bonds they thought were assured by the ratings agencies were as safe as Muni bonds. It is not as if these bonds were paying 15%, so a fund manager could ask “what’s the catch” or might think “if it seems to good to be true, it probably is.” No, these bonds paid scant more than muni’s were paying, so there was no reason to suspect they were just junk bonds.
Surprise!
You can say these pension fund managers did not do their due diligence. You can also say the ratings agencies are crooked. If you ask me, I think all buyers of these vehicles including pension funds looking for safety, were set up by the banks either intentionally or negligently.
The pension funds thought they were buying muni-bond safety.
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