A light at the end of the tunnel... General Westmoreland describing the situation in Vietnam.
In recent articles in LatinoLA there have been mentions of the greedy rich, the needy poor, the need to change the two thirds rule in order to increase taxes and educational needs of the young but the real problem is the under funded pensions of the State Employees.
Every dollar that goes to CALPERS is one dollar less that can be spent on health care, education, senior care and all other social programs.
There are 38 million people in California according to the latest census. We as citizens of California already owe CALPERS the State Employees Retirement System 200 billion dollars. That means that every man woman and child in the State of California owe the State Employee retirement fund over $5000.00 That is 38 million times $5,000.00.
CALPERS just announced that they lost 59 billion dollars last year in bad investments.
In Newhall alone they lost over a billion dollars in bad real estate investments.
Your 401K went down. Your home value dropped, your stock portfolio dropped. No one guarantees your investments, your IRA, your 401K or your stock portfolio or savings.
With CALPERS you and I have to make up the losses as our glorious legislature and previous governors signed unsustainable deals with the State Employees Union. With the additional 59 billion dollars in losses your debt, the debt of all of your family member is now over $6300. That is $6300 times 38 million.
The problem is that as a State employee you get to retire after 25 years with 90% of your highest salary. That means that if a person starts working for the State of California at age 25 he can retire at 50 with 90% of his highest salary plus fully paid medical benefits for the employee and his family.
With people living longer this means that if the employee lives to age 80 all of us are on the hook for 90% of his salary and health benefits for 30 years.
There are many employees drawing pensions from two or three different jobs held with various State and City entities. Councilman Bernard Parks draws a pension and a salary as a councilman of over $430,000.00.
Now I ask you name one thing that Councilman Bernard Parks has done for the City of Los Angeles?
The City Manager of Vernon is taking down over $499,000 in pension even though he is under investigation for financial mismanagement. There are over 5,000 CALPERS members knocking down over $100,000.00 in pension money. They are listed at http://www.californiapensionreform.com/calpers/.
This situation is unsustainable. The above does not include the pensions of teachers, city employees , county employees and law enforcement.
California will go down the same road as GM. Last yea,r GM spent more money on healthcare than it did on steel. GM was a health care concern that also sold cars according to Cramer of CNBC. No wonder it had to be bailed out.
California will go bankrupt. There is no other way. Union contracts will have to be renegotiated. As it was in Vietnam, there is no light at the end of the tunnel.
Alberto Marrero Salas:
Partner NACARA 2000. Worked on Wall Street for Merrill and Pru Bache during the go go 70's and 80's when Michael Milken was the King of Junk Bonds. Email the author