Friday, April 23, 2010

How can we solve what we do not know? The math used to create the County Pension fund FAILURE!

Well I see many people have been very surprised about the data I supply in my postings regardless of topic. Now that may has something to do with the fact I always attempt to start at the beginning and work forward, what a novel concept? I know this may sound simplistic but since I still believe 2+2=4, regardless of what new math ‘Them”, “Them”, or “Others” try and convince us exists. Even more perplexing than that is when “They”,Them” or “Others” want us to understand that there new fangled view is some how better an beneficial to us all. I am not able to always use the Modern term or catch phrase associated with my topics because as it turns out many times I cannot get the connection. I mean how something can get from here to there is a bigger question mark than the original problem. Regardless of topic I tend more often than not to present what bothers me and why it bothers me. Yes I must admit most times my main goal in doing this is trying to create thought in others. I wish to stir something deep inside you and create an action. To wake the sleeping Giant that “They”,’Them” and ‘Others” try and put to sleep with there daily dose of propaganda called the Media. You know what I am talking about, that machine that we count on to keep us informed so we do not really have to pay attention. The machine that also will inform us where blame belongs, so we do not have to waste our time and energy or any real thought coming up with that for ourselves. Well I still believe the next great idea can come from anyone and anywhere even someone like you or me. Further more I feel if we stop asking each other for thought what might we miss? The final cure of Cancer, for illness that harms our children, for technology that’s saves our Planet from pollution and all that it may cost us? I find myself eagerly waiting to see what replies or remarks may come about because of my postings. I am always truly interested in being taught and or corrected if need be. I mean the powers that be have done very little to make sure the playing field is level and rules applied regardless of the arena we may I chose to explore.

I am not a smart man but let me share with you this thought to ponder on a while. The seventh largest economy in the world may be brought down to its knees with our State and even County Pension fund shortcomings and Liabilities. Now what you might not beware of is what I feel can be considered the beginning of the crisis we now face with our California Pension plans as they stand. I do not mean to make lite of the early 90’s and the GOP’s concern that the pension fund even than was being exploited for individual gain. Regardless of era or who is in office I think we can all agree that that power can lead to exploitation so I will try and stay on point about our current Pension Liability Crisis. Please review the story below and I will continue my observations afterwards

Opinion: Pension system for public safety grew out of control
By Dan Walters
Special to the Mercury News
Posted: 04/05/2010 02:46:00 PM

Some decades ago, California's politicians decided — rationally, it seemed at the time — to create a separate pension system for police officers and firefighters.
These public safety employees, they reasoned, should be relatively young and more capable of handling the physical and psychological rigors of their vital jobs, thus emulating national policy about having a young military.
Thus was born what's called the "safety system," offering benefits that kicked in earlier and were more generous than those enjoyed by other civil servants. But once created, it became a fertile ground for political logrolling, especially after police and fire unions became powerful political forces in the 1970s.
A flood of bills hit the Capitol, aimed at expanding eligibility for safety system benefits. Obscure groups of employees, such as state licensing investigators, would petition the Legislature to be included.
For groups that had made it into the system, the big payoff came in 1999, when the Legislature and then-Gov. Gray Davis enacted a sweeping increase in public employees' pension benefits.
It included a 50 percent increase in safety system pensions and a proviso that pensions would be calculated on an employee's highest earning year — which encouraged "pension spiking" through use of overtime pay and other gimmicks.
The 1999 legislation applied only to state employees, but most cities and counties matched
It was, for instance, one factor in the city of Vallejo's bankruptcy, although not the only one. Vallejo also overspent revenue from the housing bubble, making unsustainable commitments, especially for police and fire employee contracts.
It's generally assumed that the hefty pension benefits implemented a decade ago cannot be unilaterally repealed, even for a city in bankruptcy. But under the financial gun of bankruptcy, Vallejo's firefighters union has agreed to create a two-tier pension system in which new hires would get one-third less in benefits than current workers, and to raise employees' share of pension fund costs.
Gov. Arnold Schwarzenegger has been attempting something similar at the state level, but has gotten nowhere with state unions and the union-friendly, Democrat-controlled Legislature.
The leading Republican candidate for governor, Meg Whitman, says she'd push it if elected, characterizing the huge and growing unfunded liability for pensions and retiree health care as "the freight train coming through the tunnel at California."
The state pension system's chief actuary has described the current structure as "unsustainable." No matter who's elected governor, it will be a major financial headache.

DAN WALTERS is a Sacramento Bee columnist

Back to my thoughts regarding this pension Crisis;
We have a current Governor Arnold Schwarzenegger who ran on a recall election claiming reform and responsible government. Yet he like our own Board of Supervisors here in Santa Barbara he has failed to act on what may be the single most damaging issue in recent times for all Californians, the need to correct current policy and insure proper, reasonable and obtainable funding for our pension plans. Now work with me here folks just for a moment. So in current form I would say a sub prime(mortgage) like situation is now hitting our pension fund. In my view what we has transpired in both situations, Pension and Mortgage funding is a change in policy or program created to exploit current market conditions at that time or in this case just a short 10 years ago. With no regard to fundamentals and risk that are taken with said change. Now one outstanding feature of these current plans is that your pension benefit can equal your highest earning income year and generally speaking that will tend to be your final years of service. Can we all agree on that? An to think I call myself Magic check this out. I cannot correctly fund or be aware of my liability to the Individual’s pension until I know the length of service and the final year’s income. Which will remain unknowns until the liability has comes due. Yet I am blindly under contributing (based on his start salary vs final)to the fund in hopes that my contributions and future investment return rate will some how and Magically match my liability 20 to 30 years down the road.

If we do not know any parameters in sound mathematical format upfront how can we meet our obligation and liability EVER?

Remember when I said earlier that “They”, “Them’ and “Others” have new fangled terms for us to buy into? Well how about the term “unearned investment income” Meaning they keep a ledger on what they failed to accomplish as if it validates there short comings. Now should we buy into that? They also base there “unearned income” on a value picked out of the air and in Santa Barbara County that number is 8.15% return. Which by the way is the highest expectation of any pension plan I have found in California. My point is this based on my interpretation of the short comings of our current Pension plans other than a rapid change in structure and policy what can be done and why are we waiting? Like I have mentioned early we need your thoughts and possible solutions because the current group of politicians we have trusted failed us ten years ago when they implemented unobtainable goals and left the future to solve them.

If you like what I have written please share it with others. This and my other postings can be viewed at;

Larry Mendoza

P.S. All this data and tons of other story’s are available on the internet and just about every other print media in the State but Santa Barbara. Why is that?

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