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Hey! Number two sounds good. This must be Wykoff.
Cal. Budget 2011, pt 4: The Governor explains it all to you.
– March 22, 2011Posted in: "The OC", california budget, Fresh Juice, jerry brown, taxes
Irvine Reddit feed re same story. https://www.reddit.com/r/irvine/comments/1k1i1vu/irvine_rejects_dirty_politics/
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[REDACTED] Tammy has other more pressing things to worry about like her own liberty which may be in jeopardy due…
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Tammy Kim unloads a MOAB* of schadenfreude. Over Here. https://www.tammykim.com/irvine-special-election-results She sent it to me and I believe I will…
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CUT.
Brown pretty much tells it like it is. Schwarzenegger used to borrow money to get previous budgets passed which is part of the reason we have such a big deficit. When I’m in debt I temporarily have to spend less and make more money. California will have to do the same thing. The deficit is so big that we will have to drastically cut spending and, at the very least, keep those tax extensions. Otherwise the deficit is just gonna get bigger.
If all we had to cut is the pension contributions, all state employees get to keep their jobs, and services and programs stay in effect.
The pension funds have tons of value to pay benefits for years to come.
All that is needed is to vote on a moratorium on pension funding.
In fact the great increases in pension benefits of the past decade were sold to the elected officials and the taxpayers as a no cost, no pain benefits as the pensions were making so much money they would pay for themselves forever.
The vote by the people should be on the choice of paying Californians to work or paying for the high life of Wall Street money changers.
Cook, the state’s annual cost of pensions is less than 20% of the State deficit. How you gonna cover the other 80% ?
Most of what the state spend money on is salaries and benefits.
For every dollar spent on wages, the state pays 50 cent on retirement.
The state wants to spend 100 billion, but only expects to receive 80 billion, leaving a 20 billion shortfall.
80% of the spending in on wages and benefits. 100 x 80% = 80
1 dollar in wage plus 50 cent in retirement = 1.5 or 2/3 and 1/3
1/3 of 80 is 26 billion dollars the same number of the current deficit.
So stop paying retirement contributions. Let the funds use the assets and then fix the system.
Cook, my data on the State budget’s retirement cost is that it is about 4% of payroll for CalPERS and less than that for teachers (CalSTRS) annual cost and thus to stop paying would only “save” the state $4 billion or less regarding its CalPERS required contribution (most of CalSTRS contributins come from local school district budgets, not direcly from the State). I really question your data that the States’ retirement annual contribution is half again the cost of payroll. What is your source for this figure? Let’s drill down on this
I think you are mixing up the “rate of return” expected with contributions required.
Here is a quote from “Stanford Institute for Economic Policy Research” dated Nov 2010. Stanford University • November 2010
Stanford University • November 2010
(the reort is not very rosey)
“The average for all systems
in the 18-year scenario is 50
percent, suggesting that one-half
of future covered payroll will
be required to meet unfunded
pension and OPEB obligations.
It is important to emphasize
that this estimated share of
covered payroll reflects only that
required to eliminate unfunded
obligations; contributions to
fund ongoing pension
It appears you have relied upon the estimates of a study commonly referred to as the Stanford study. I understand this was a study done by grad students under the direction of a Professor, and it argues for using a discount rate equal to the rate of return on long term treasury bills, or about 4%. This study is very controversial, and has been discredited by some as not objective and intended to magnify the underfunding issue, which it has. Using a discount rate that low is what increases the estimated unfunded liability – it more than doubles it compared to the official CalPERS actuarial estimate.
You might wish to go to the CalPERS and CalSTERS web sites and look up the official response to this study to obtain a different perspective. To my knowledge no one in the State Legislature is proposing that the State budget be built based upon the assumptions and forecasts of this report, including proposing to budget anywhere near 50% of payroll for an annual retirement contribution.
Thus, your estimate of savings to be garnered from the State taking a retirement funding holiday is way, way overstated. The State budgets about 4% of payroll for retirement costs, and a retirement funding holiday would only produce cash savings of that amount (while of course increasing the unfunded liability even more going forward if nothing else changed).
The general fund of the state pays state employees 7 billion in salaries and another 3.4 billion in pension and health costs. So that is 50 cents on the dollar.
(Current state budget summary link)
http://www.ebudget.ca.gov/pdf/BudgetSummary/EmployeeCompensationandRetirement.pdf
The states general fund does not send out every pay check. there are many state funds and the pay vs. benefit ratio are about the same for each of these funds.
The “thing” about the state budget, and the cities and counties budgets.
They are designed to hide the true cost.
According to Capers and Calstrs they will receive from the state in contributions 14.7 billion this year.
I expect the other retirement funds the state pays for, like the legislative and courts etc would add another 6 to 10 billion. (20 to 25 billion wow that is more than 4 percent)
And while looking for those hidden numbers, I found, according to the financials, those funds earned more on their assets than what was needed to cover costs and benefits. So a 5 to 10 year moratorium shouldn’t hurt the bottom line.
The governor is looking for a way to close the shortfall without cutting services. Cut the money going to the Wall Street money changers.
O.K. Cook – let’s take your figures, and return to my original question. The State has a $24 billion deficit or more as I understand it. Your figures are that the annual state pension contribution is 50% of payroll, which you say is $3.4 billion, including both pension and health costs. Not making that retirement contribution then would bring the defict down to approx. $ 20.6 billion. How do you propose to cover that? If your figure that total state payroll is $7 billion, eliminating each and every state employee still would not cover that hole, so aren’t some other drastic actions going to be needed, and if so what?
That is why I not be in the legislator. I not know the answer.
A cleaner more transparent accounting of state spending would be helpful.
The 7 billion is the state payroll, taken from the state budget summary.
The 15 billion in contributions to the 2 big pension funds comes from their accounting reports.
And we know that the cost of pensions is not 2 dollars for ever dollar in pay.
So the governor has cut 14 billion of the 26 billion deficit and has to come up with another 12 billion.
Lets take 7 billion payroll times 4 percent for pensions, that is 280 million dollars. Now subtract that 280 million from the 15 billion that the pension funds are expecting, and Walla, not only is the 12 billion the governor been looking for to cover that balance, but there be an extra 2 ½ billion for more tax relief.
Why doesn’t the government accounting numbers match?
Guys, guys! In plain English please! Will we Californians be able to patch the hole in our ship of state, or will we sink completely while our elected representatives bicker over what sort of duct tape we use?
Even – well put!. Wish I knew the answer. However, it sounds like there is not even agreement on whether to use duct tape or super glue.