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Stockton bankruptcy ruling could deal blow to CalPERS, public pensions


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2014 Oct 1, 12:40pm   30,734 views  91 comments

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1   Ceffer   2014 Oct 1, 1:51pm  

"Bankruptcy law supersedes state pension laws requiring cities to fund workers' future retirements"

Like, Duhhhhh!

2   Y   2014 Oct 1, 2:30pm  

what's good for the private sector is good for the public sector.

3   indigenous   2014 Oct 1, 3:14pm  

Oh hell yes, I couldn't believe they didn't do this the first go around. The cool thing about this is precedent. So maybe they will readdress San Bernardino and San Jose. But now the unions will have to consider their impact on the cities.

4   Ceffer   2014 Oct 1, 3:34pm  

It only takes a few years of litigation and tens of millions of dollars in legal fees to state the obvious. That's what makes our legal system great.

They had to know that state laws giving special status to public service unions were bogus, just a smoke screen to make it seem the spiking was a guaranteed graft.

5   Blurtman   2014 Oct 2, 12:36am  

But it doesn't affect bonuses, apparently.

6   Tenpoundbass   2014 Oct 2, 12:41am  

America has finally gotten Union fatigue.
Maybe it's time Unions go back to bustin some heads, to get their way.
God know's Ameica loves a good assbeating.

7   indigenous   2014 Oct 2, 4:05am  

APOCALYPSEFUCKisShostikovitch says

DIE!, CALPERS, FUCKING DIE!

It so nice to see AF speaking sooth, god bless him.

8   Bellingham Bill   2014 Oct 5, 3:18am  

It's not "sane" to work people for 20-30 years on a salary deal then pull the rug out from under them when they come to collect on the back end of the deal.

Evil more like.

Not that the public safety people have done a particularly good job of "policing" pension abuse among their own retiree ranks. Pensions should never be "spikable" in the first place.

But the larger problem is it's awfully easy to underfund pensions, since the people making the decision at the time aren't the ones who have to pay for it, politically, if & when it all blows up down the road. Gray Davis, I'm looking at you!

But the better the public sector pays, the better the private sector has to pay to compete with it.

We don't have a fiscal problem in this state (or country), we have a distribution problem, too much collecting with the millionaires and billionaires, per Piketty etc.

a well-paid public sector is part of the solution, not part of the problem.

billionaires, their paid lackeys, and those bamboozed by the lackeys will disagree with this of course.

working people have to hang together or we will all hang separately, per the smart man's saying from a long time ago

9   indigenous   2014 Oct 5, 3:22am  

Bellingham Bill says

It's not "sane" to work people for 20-30 years on a salary deal then pull the rug out from under them when they come to collect on the back end of the deal.

Evil more like.

With Fed workers averaging double their private sector counterparts, I'm not sure where the evil lies?

Bellingham Bill says

But the larger problem is it's awfully easy to underfund pensions, since the people making the decision at the time aren't the ones who have to pay for it, politically, when it all blows up down the road.

Agreed

10   socal2   2014 Oct 5, 4:16am  

Bellingham Bill says

It's not "sane" to work people for 20-30 years on a salary deal then pull the
rug out from under them when they come to collect on the back end of the
deal.


Evil more like.

Sorry - but I think is much more insane and evil to allow hundreds of thousands of middle class people who live in cities like Stockton, San Bernardino and Vallejo have their "contracts" broken when their cities turn to shit with reduced services, more crime, raised taxes and shafting all creditors..............all the while progressives, politicians, and unions fight tooth and nail to keep the bureaucracy's outrageous pensions completely untouched.

Why do progressives think EVERYONE should feel the pain of municipality mismanagement but the incompetent and sometimes corrupt government bureaucracy?

Face it - many of these cities simply got too greedy during the housing boom and property tax windfall and raised the bureaucracy's compensation to unsustainable levels thinking the housing boom was the new normal.

11   Bellingham Bill   2014 Oct 5, 4:53am  

socal2 says

the bureaucracy's outrageous pensions completely untouched.

"bureaucracy" is depersonalizing the reality that these public sector employees are people too.

You are a very bad person for using deceptive terminology like this.

Shame on you! Shame I say!

As for the solution, it certainly involves higher taxation. At this point if I were King of California I'd like to see less tax money going to DC and more revenue staying within the state. DC's got enough to work with now.

Let's not pretend the top 10% of this economy aren't swimming in new wealth since the recovery. We need to shake that tree a little more.

Fed: Gap Between Rich, Poor Americans Widened During Recovery
Consumer Survey Finds Average Family Didn't Recover Wealth Lost From 2007-2010

12   socal2   2014 Oct 5, 5:09am  

Bellingham Bill says

"bureaucracy" is depersonalizing the reality that these are people too.


You are a very bad person for using deceptive terminology like this.

Ha! Not sure if it is sarcasm or not.

At least I mention them as one of the stakeholders.

Whereas progressives never mention the hundreds of thousands of middle and lower class folks living in these cities who are forced to pay more taxes and suffer reduced services as they argue government workers (bureaucracy) should have absolutely no skin in the game and shouldn't have any responsiblity for running the cities into the ground with their massive compensation packages.

Beyond the moral component of making everyone suffer a City's bankruptcy other than the government bureaucracy, there is the reality component that these cities have no hope of digging out without reforming pension liabilities. Vallejo cut services, raised taxes, shafted bond holders and left pensions in tact during their bankruptcy a few years ago - now they are looking at bankruptcy again a few years later.

http://www.reuters.com/article/2013/10/01/usa-municipality-vallejo-idUSL2N0HM05C20131001

13   spydah_hh   2014 Oct 5, 8:57am  

"Payments for future worker retirements" does that mean for future workers who have not been hired or future retirees, meaning those who are hired but not yet retired?

14   spydah_hh   2014 Oct 5, 8:59am  

Bellingham Bill says

We don't have a fiscal problem in this state (or country), we have a distribution problem, too much collecting with the millionaires and billionaires, per Piketty etc

Sometimes I wish I could dislike a post more than once.

15   marcus   2014 Oct 5, 11:10am  

Bellingham Bill says

We don't have a fiscal problem in this state (or country), we have a distribution problem, too much collecting with the millionaires and billionaires, per Piketty etc.

a well-paid public sector is part of the solution, not part of the problem.

Well said.

People don't understand how much of the problem is simply past underfunding. We are talking many years of a just a 1 or 2 percent of state and local government money NOT going where it should, because it's too easy to postpone pension funding. That small annual underfunding grows exponentially, and then all of a sudden, we supposedly can't afford these pensions ?

Thats criminal. And of course the abuses (such as spiking) have to end. There has been recent legislation in California addressing it.

And yes the public sector is huge. People don't understand the impact (especially at this point) that public sector wages have on private sector wages.

If and when we get to where government workers aren't paid even decently, we will know that third world status is inevitable, and private sector pay will follow. These never were disconnected. Typically public sector pay has been seen as lower than private sector, but more secure, and with good benefits, including pension. The private sector has to pay better, to attract good people, and the public sector pay also, guarantees a demand for those jobs and hence a reasonable quality of applicants to choose from for police, teachers, firefighter/peramedics etc.

If you think cops are bad now, with some of the crazy videos we see, just imagine what it will be like when they are paid less and their benefits are cut. We would probably have very corrupt and purchasable law enforcement at that point.

16   indigenous   2014 Oct 5, 11:16am  

marcus says

People don't understand how much of the problem is simply past underfunding. We are talking many years of a just a 1 or 2 percent of state and local government money NOT going where it should, because it's too easy to postpone pension funding. That small annual underfunding grows exponentially, and then all of a sudden, we supposedly can't afford these pensions ?

But Why should that be guaranteed by the taxpayer?

17   socal2   2014 Oct 5, 12:41pm  

marcus says

Well said.


People don't understand how much of the problem is simply past
underfunding.

Right - cause it certainly has nothing to do with massive abuse like this - right?
http://www.bloomberg.com/news/2012-08-01/police-chief-s-204-000-pension-shows-how-cities-crashed.html

Stockton Police chief works 8 months, retires at 52 and gets $204,000 a year for the rest of his natural life.

There are thousands and thousands of examples of 6 figure pension abuses like this all over the State.

18   HydroCabron   2014 Oct 5, 12:50pm  

Why not another tax cut? Wouldn't just one more tax cut do the trick?

19   socal2   2014 Oct 5, 1:11pm  

HydroBenghazEbolaCabron says

Why not another tax cut? Wouldn't just one more tax cut do the trick?

Both Stockton and Vallejo already raised sales taxes to some of the highest levels in the State to try and deal with their bankruptcy. That didn't seem to work.

http://articles.latimes.com/2013/nov/06/business/la-fi-mo-stockton-voters-approve-tax-hike-to-help-bankrupt-citys-finances-20131106

Just amazes me how demanding better and more efficient government services is not even in the conversation. Its always about tax levels and which rich person in Wall Street isn't contributing their "fair share".

Do the Progressive and Liberals around here REALLY BELIEVE that cities like Stockton and Vallejo were well run organizations and should have nothing to answer for when they bankrupt the Cities they run?

I'm an engineering consultant that has been working with California municipalities for over 20 years. I still remember all my clients giddy when they got their pension plans improved in the late 1990's talking about how they were going to retire big in a few years. Even back then I knew it was fantasy money. I kept telling my municipal friends that they better have a backup plan if these pensions don't pan out.

No one is talking about taking their entire pensions away, but trimming some of the crazy 6 figure pensions and making some people work 5 extra years ain't the fucking end of the world.

20   marcus   2014 Oct 5, 1:17pm  

socal2 says

Right - cause it certainly has nothing to do with massive abuse like this - right?

http://www.bloomberg.com/news/2012-08-01/police-chief-s-204-000-pension-shows-how-cities-crashed.html

He lasted eight months and left the now-bankrupt city at age 52 with an annual pension that pays more than $204,000 -- the third of four chiefs who stayed in the position for less than three years and retired with an average of 92 percent of their final salaries.

He lasted 8 months a police chief, but presumably put in a few decades in before that, and would have deserved a pension anyway, but not nearly that big. But don't be deceived. This is like the professional athlete, that gets the big contract but then is injured.

Yeah, I would like it if they made the pension calculation more complex and nuanced. This example is not much different in appearance than spiking, accept for the fact that he might have actually deserved and earned that promotion.

You do seem awfully confused though. Those overpaid exorbitant pensions are paid out of calpers, which is like a big insurance fund. The fact that that guy got more than he deserved, might be related a little to the rates that Stockton has to pay in to calpers, but for the most part their problem was deferring their payments in, which should have been budgeted as part of their payroll expenses, and it should have never been deferred.

21   tatupu70   2014 Oct 5, 9:17pm  

spydah_hh says

Sometimes I wish I could dislike a post more than once.

Disliking it doesn't make it any less true...

22   spydah_hh   2014 Oct 5, 10:30pm  

tatupu70 says

spydah_hh says

Sometimes I wish I could dislike a post more than once.

Disliking it doesn't make it any less true...

I suppose you can say the same for liking it right?

23   spydah_hh   2014 Oct 5, 10:34pm  

I bet Marcus, Bill, and Tat, don't even know where and how pension plans started and why the private sector dropped them.

The public sector is always late in making adjustments. Pension plans are crippling many of the cities revenues yet they don't want to admit it nor do they want to deal with the problem, because to fix the problem means your political career maybe over.

24   tatupu70   2014 Oct 5, 11:07pm  

spydah_hh says

I bet Marcus, Bill, and Tat, don't even know where and how pension plans started and why the private sector dropped them.

It's pretty easy to determine why the private sector dropped them--they could. As organized labor's power has decreased, owners have taken advantage to reduce labor costs as much as they can.

Before you state the BS that companies HAD to in order to stay competitive, I'll remind you of this chart:

It's pretty clear that there has been a large shift from companies paying out wages to laborers to companies paying out capital gains to owners.

25   marcus   2014 Oct 5, 11:17pm  

spydah_hh says

I bet Marcus, Bill, and Tat, don't even know where and how pension plans started and why the private sector dropped them.

Yes, I can see that it's quite complex. The way the corporate job market works looks great these days in the rear view mirror for someone who works for 14 different companies in 35 years as they climb the ladder. And I'm sure from the corporation's side 401ks look efficient in many ways and is less costly than the old way,...keeping a lot of "dead wood" on the job until retirement (not that they had to).

I think there are a lot of reasons for the decline of pensions in the corporate world, but the biggest are corporations lowering costs, and also going with retirement planning vehicles that better fit people when they change jobs.

That could have been accomplished in a way that preserved defined benefit plans, but that would have been more costly and complex.

spydah_hh says

Pension plans are crippling many of the cities revenues yet they don't want to admit it nor do they want to deal with the problem, because to fix the problem means your political career maybe over.

I frame the last part a little differently. I think that the alignment of labor with one political party, and some of the irrational worker pay or benefits that have occasionally, resulted from that relationship have ultimately been bad for the worker.

But public pensions didn't have to be that way. Whenever unsustainable benefits are bestowed on workers, that is ultimately bad for workers and good for those that wish to end tpublic pensions. But this is a relatively small part of the problem, and is used by folks such as yourself or Mish, to rationalize getting out of the consequences of deferring payments into pension plans for police and other city workers. And these cases of deferring payments into pensions is the FAR greater reason for the unfunded liabilities we here so much about.

26   spydah_hh   2014 Oct 5, 11:58pm  

tatupu70 says

It's pretty easy to determine why the private sector dropped them--they could. As organized labor's power has decreased, owners have taken advantage to reduce labor costs as much as they can.

You can say that. But only because government made US labor expensive. Businesses have so many things to deal with when it comes to hiring workers. They have workers liabilities, various labor taxes, legal fees, mandatory health care and I can go on. So the fact that big businesses can outsource their labor for a much cheaper cost is part of the reason why they're capable of receiving more profits.

Another big culprit is the FED keeping interest rates low and QE.

27   spydah_hh   2014 Oct 6, 12:00am  

tatupu70 says

It's pretty easy to determine why the private sector dropped them--they could. As organized labor's power has decreased, owners have taken advantage to reduce labor costs as much as they can.

Tell me why did the private sector start them?

28   tatupu70   2014 Oct 6, 12:11am  

spydah_hh says

You can say that. But only because government made US labor expensive. Businesses have so many things to deal with when it comes to hiring workers. They have workers liabilities, various labor taxes, legal fees, mandatory health care and I can go on. So the fact that big businesses can outsource their labor for a much cheaper cost is part of the reason why they're capable of receiving more profits.

Another big culprit is the FED keeping interest rates low and QE.

That's all crap. Seriously--pure BS.

I'm glad you found a way to work the Fed into this discussion though. Because it's clearly the reason for all of society's ills.

29   tatupu70   2014 Oct 6, 12:14am  

spydah_hh says

Tell me why did the private sector start them?

I don't think there's a definitive answer there, other than to say that they are a benefit and designed to attract workers.

30   spydah_hh   2014 Oct 6, 12:15am  

tatupu70 says

spydah_hh says

You can say that. But only because government made US labor expensive. Businesses have so many things to deal with when it comes to hiring workers. They have workers liabilities, various labor taxes, legal fees, mandatory health care and I can go on. So the fact that big businesses can outsource their labor for a much cheaper cost is part of the reason why they're capable of receiving more profits.

Another big culprit is the FED keeping interest rates low and QE.

That's all crap. Seriously--pure BS.

I'm glad you found a way to work the Fed into this discussion though. Because it's clearly the reason for all of society's ills.

Believe it or not it truly is. Hell even mainstream media and the congressional hearings are starting to questing Janet Yellen and the FEDs policies.

Hell even the Dallas FED chairman Richard Fisher has commented about the FED policies and how it makes the rich richer.

http://www.zerohedge.com/news/2014-04-16/fed-policies-have-made-rich-much-richer-fed-president-admits

http://www.dallasfed.org/news/speeches/fisher/

31   spydah_hh   2014 Oct 6, 12:20am  

tatupu70 says

spydah_hh says

Tell me why did the private sector start them?

I don't think there's a definitive answer there, other than to say that they are a benefit and designed to attract workers.

Pension plans became popular in the United States during World War II, when wage freezes prohibited outright increases in workers' pay. The defined benefit plan had been the most popular and common type of retirement plan in the United States through the 1980s; since that time, defined contribution plans have become the more common type of retirement plan in the United States and many other western countries.

It began thanks to FDR's price controls. Business couldn't pay their workers more wages so instead they gave them other benefits such as pensions and health insurance. However, these were unsustainable once the price controls were removed, thus leading to the private sector to slowly remove the benefits.

32   tatupu70   2014 Oct 6, 12:28am  

spydah_hh says

It began thanks to FDR's price controls. Business couldn't pay their workers more wages so instead they gave them other benefits such as pensions and health insurance. However, these were unsustainable once the price controls were removed, thus leading to the private sector to slowly remove the benefits.

No--they became more popular during the war, but that wasn't the start of pensions.

And why did it take 30+ years before the private sector started slowly removing the benefits?? Because that's when the power of labor had eroded and Mr. Reagan certainly helped it along.

33   tatupu70   2014 Oct 6, 12:32am  

spydah_hh says

Believe it or not it truly is. Hell even mainstream media and the congressional hearings are starting to questing Janet Yellen and the FEDs policies.

Hell even the Dallas FED chairman Richard Fisher has commented about the FED policies and how it makes the rich richer.

First--zerohedge is not mainstream.
Second--Others can certainly second guess the Fed's policies and decisions. But that doesn't mean that the Fed has anything at all to do with private businesses deciding to get rid of pensions.

How did you make that leap? Other than your bias against the Fed and all things remotely related to government?

34   JH   2014 Oct 6, 12:33am  

spydah_hh says

, thus leading to the private sector to slowly remove the benefits.

Wait, the private sector can't afford to pay reasonable benefits and fund pensions? Bullshit! See Bill's chart. Your posts show you are blinded by foxnewslike rhetoric and not very good at math.

35   indigenous   2014 Oct 6, 12:42am  

spydah_hh says

Believe it or not it truly is. Hell even mainstream media and the congressional hearings are starting to questing Janet Yellen and the FEDs policies.

Even Piketty who not to long ago said the reason was because the rich did not pay as many taxes, said in his latest book that the cause of inequality was inflation caused by the Fed.

36   mell   2014 Oct 6, 1:06am  

JH says

spydah_hh says

, thus leading to the private sector to slowly remove the benefits.

Wait, the private sector can't afford to pay reasonable benefits and fund pensions? Bullshit! See Bill's chart. Your posts show you are blinded by foxnewslike rhetoric and not very good at math.

That chart is misleading though. Companies also have hired more people so their expenses are higher. Plus some have issued their own bonds. What you have to look at is how long they could go without layoffs after subtracting debt from cash in case of a downturn. Then you will find out that the whole system runs on cheap debt and that most would not even have a couple of months to react. And if you believe the meme that the majority of the profits gets absorbed by CEO and upper management, it's looking even worse. But the taxpayer doesn't have to bail them out if and when they fail. Well at least that was true until 2008. The Fed and the government's crony capitalist policies are the source of the problems. Once you abolish the rule of law and defer responsibility to future generations, everything goes to shit - that's why that ruling is correct and so important.

37   JH   2014 Oct 6, 1:10am  

The ruling is correct that cities should receive full benefits while reducing their payments? Boy o boy, I can't wait to see how that plays out for a 401k!!

38   socal2   2014 Oct 6, 1:49am  

marcus says

He lasted 8 months a police chief, but presumably put in a few decades in
before that, and would have deserved a pension anyway, but not nearly that big.
But don't be deceived. This is like the professional athlete, that gets the big
contract but then is injured.

Regardless - letting someone retire at the ripe old age of 52 at $200K+ pension for life is madness and mathematically impossible for virtually any municipality. With current rules, someone can work for a City for 30 years and literally get 40 more years of full pay......even if they bankrupt the City in the process.

And your professional athlete analogy fails because if a professional athlete gets injured, Cities don't need to go bankrupt and let their towns fall to shit to keep paying their pensions like they do with our ridiculous union pensions.

39   socal2   2014 Oct 6, 2:17am  

tatupu70 says

Before you state the BS that companies HAD to in order to stay competitive,
I'll remind you of this chart:

Regarding Corporate profits, America already has the highest Corporate Tax Rate in the entire world!
http://www.politifact.com/punditfact/statements/2014/sep/09/eric-bolling/does-us-have-highest-corporate-tax-rate-free-world/

How much higher do the Progressive want to raise the Corporate Tax rate to keep Stockton's police chief making $204,000 for the rest of his natural life?

Again - it just amazes me how the discussion is NEVER about the quality, performance and efficiency of our massive government bureaucracy. When our government fails us in our schools, fails to maintain infrastructure, to the corruption at the VA - Progressives just say we need to raise taxes and give the government more money.

Even when cities like Stockton hit rock bottom due to their poor management and greed, Progressives want everyone else to pay up (tax payers, reduced servics, bond holders) - but wants to leave the unions and government worker's compensation untouched.

40   MisdemeanorRebel   2014 Oct 6, 2:21am  

tatupu70 says

And why did it take 30+ years before the private sector started slowly removing the benefits?? Because that's when the power of labor had eroded and Mr. Reagan certainly helped it along.

Yep, and the track record of individually managed 401ks is terrible. Also, it was during the Reagan Administration that companies were allowed to reduce pension funding under certain market conditions. It was great while the stock market rush lasted, until it didn't. Then the pensions were underfunded, media seldom mentioned the legalized underfunding, and the workers got the blame for the companies and the politicians' bad policy.

All part of the excellent track record of the last 30 years of reducing worker power, pensions, job security, etc. -- and we end up with... Prosperity?!

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