In my earlier research I have shown that in the time period from 1996 to 2000 16 California county pensions had an average on investment returns of 14.84% a year for the entire 5 year period. Or in other words enough return in just 5 years to more than double there value from the entire previous 50 years of there fund performance. Now the document that I used to come up with this finding has since been pulled from it's spot on the Santa Barbara Grand Jury's web page. Luckily for us all I have the site where that reference material can still be pulled from @
This great when you realize the SBCERS fund was shooting for an 8.16% benchmark rate of return. But wait a minute with a Consumer price index assumption of 4.75 included in the 8.16% assumption value. That same 5 year period our fund actually did more than doubled it's required rate of return. You see of that 8.16 assumption 4.75% was eaten up by the C.P.I. So 4.75 %- 8.16% = 3.41% real rate of return needed for our SBCERS fund to remain solvent. Think of the C. P. index as an adjustable mortgage rate index factor and you will understand this all just fine. So 14.84 - 4.75 C.P.I. = 10.09% real rate of investment return per year. Than divided 10.09 by 3.41 = 2.96 times greater Or in other words the pension funds actual performance on a yearly basis (1996-2000) was 3 times greater than required per year.
Now stop and go back over that again until you see what I am saying. How can a pension perform 15 times greater than the real rate of return of 3.41 in a 5 year period and now be under funded by 1,000,000,000 dollars? I have enclosed two 20 year charts provided by the SBCERS pension fund for your review.
You see we only have to subtract the C.P.I. index once per year against actual performance regardless of high much it over performs.
Than another problem with these two charts shows that the SBCERS pension fund was only actually expecting a 8.16% rate of return for 2007,2008, an 2009. When we have been told over an over for the last 20 years 8.16% return has always been our goal. Since the 2009 C.P.I. index is a negative number the effect of that poor year actually means the damages to our fund could be as much as 6% less than reported . When your talking about an alleged 388 million dollars in losses well that could mean a lot of fraud has been transpiring for years.
I could sit here and break this down that way or this way but why bother. There is something wrong with California Pension plans and the public has been treated as fools. An to my Dad thank you for the encouragement to keeping up the good work. One man can make a difference an I am just such a man!
Editorials: Our Opinion: County pension fund cited in state, national media and Magic's Blog!The issue of public employee pensions is a state and national problem, but it requires a solution in Santa Barbara County.
December 5, 2010 7:53 AM
Santa Barbara County's pension fund is increasingly mentioned in national and state media as one of the public pension funds in California that is in particularly bad shape.
Steve Malanga is one of the top business and urban writers in the nation. He is an expert on public employee union pensions. A senior fellow at the Manhattan Institute in New York, he recently identified Santa Barbara County's pension fund as among those in California that bear attention.
Discussing the issue of public employee pension funds generally in the United States, Mr. Malanga wrote:
"California is in particularly bad shape. San Francisco and Los Angeles are among the places with the greatest liabilities among cities, amounting to $34,940 and $18,643 per household, respectively. Their combined pension debt of $33 billion is in addition to some $600 billion in Golden State unfunded liabilities. Also on the watch list from California are a host of other cities and counties, including Contra Costa County, Santa Barbara County and the city of San Jose. Los Angeles County . . . has its own woes with a staggering $27 billion in unfunded liabilities."
The issue of public employee pensions is a state and national problem, but it requires a solution in Santa Barbara County. A recent report by Joe Nation of the Stanford Institute for Economic Policy Research on unfunded local government liabilities also is of interest.
Dr. Nation is no conservative. He is a former member of the California Assembly who was principal co-author of Assembly Bill 32, the Global Warming Solutions Act.
According to the Stanford report, in June 2008 Santa Barbara County showed $245 million of unfunded liabilities in its pension fund, but if the rate of future return on investment were lowered from 8.16 percent (the current figure) to 6 percent, then unfunded liabilities ballooned to $1.177 billion. If the rate of return were lowered to 4 percent, unfunded liabilities would increase to $2.433 billion.
Moreover, these data were from before the stock market crash of 2008 and 2009. Unfunded liabilities are even more now.
Both Republicans and Democrats should support public employee compensation reform, especially of pensions. What sense will it make to have a county pension program paying out $200 million per year — which will be the case in another 15 or so years — when the county general fund is now only $200 million per year?
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