When Lunatics Run the Asylum You Get Monty Python

[Geee]

American Spectator:

California’s pension funds continue to face a fusillade of bad news, including new reports showing that retirement benefits consume 20 percent of Los Angeles’ general-fund budget. Put another way, one out of every five dollars the city spends goes to a retired city worker, a percentage that has quadrupled in the past 14 years. That’s an astounding number that is crowding out other public services. Things are even more troubling in San Jose, where pensions and retiree health care now consume nearly 28 percent of the budget.

 

State officials have been giddy that the budget is “balanced” and are eager to spend more money on new programs. But reports a few months ago show the state deeply in the red ($175 billion) under new accounting procedures that reflect pension debts. The California Public Employees’ Retirement System, CalPERS, had investment returns of a measly 0.6 percent last year. Even that union-dominated fund’s top investment officials seem concerned.

 

During a presentation at the CalPERS Board of Administration meetings earlier this month, Chief Investment Officer Ted Eliopoulos played a video interviewing investment gurus who suggested that CalPERS’ expected rates of return are unrealistically high. In public-pension funds, it’s all about the return rates. For private-sector peons, a rate of return is a rate of return. If I invest in a mutual fund and get a 7 percent rate of return, that’s what I get. If it’s 2 percent, that’s that. I live either with the benefits of soaring investments or the bad news if my investment choices are subpar.

[Valin]

@Geee

Not Just Ca.

Storm Clouds Gather Over American Cities

(Snip)

Looking at the fiscal nightmares facing places like LA, which now spends 20 percent of its annual budget to cover pension liabilities, and Dallas, we wonder how much longer residents will be willing to live in nearly-insolvent cities. There’s a lot of talk these days about urban renewal, with greener waterfronts and hipster gentrification driving up real estate values and making previously-decrepit neighborhoods hot spots of culture. But today’s urban havens are built on a very unsteady foundation of blue city governance. At what point will the costs of maintaining today’s blue cities outweigh the appeal of what we might call “Brooklynization”? It’s not just rising housing prices that could drive people out; imagine the tax rates which could be necessary to pay off pension liabilities. Particularly for families looking to make an investment in real estate, cities may start to look much riskier.

 

The recent election showed how much America is split between city-dwellers and rural/suburban dwellers. Even as the Constitution ensures political representation for rural areas, the wealth of cities serves as a countervailing economic power. Exactly what will happen if cities go bankrupt and rural America is asked to use its tax dollars to bail them out remains to be seen. But we predict it’s not going to be pretty.

 

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As I Keep Pointing Out....Trends That Cannot Continue....Won't.