Pensions and the County Budget

At the July 10^th Upcountry Community Council meeting, Chuck Iley, Amador County’s CAO/Chief Administrative Officer, gave an excellent presentation about our county budget. It is now difficult to budget for our county worker’s pension contributions, because whatever cash CalPERS demands, the county must surrender. I asked about the informal discussions from a few years ago, about leaving CalPERS and possibly joining with Calaveras County in an independent pension fund. He responded by saying that it’s impossible now because we would have to donate about $50 million to their unfunded liability.

We can debate endlessly about CalPERS' good and bad deals, but the simple fact remains that they are just too big. Unless the law of large numbers is magically repealed, they can never do better than the market as a whole. Although leaving CalPERS is now impossible, it was even a difficult decision back then. The rate of return could be much higher. But with overhead costs rising the actual bottom line could be unpredictable.

I was a pension board trustee for about eight years for a government agency that had left CalPERS. I watched Federal encroachment increase and regulatory expenditures expand. While the Constitutionality seemed questionable, the power grab wasn’t. One of those new regulations was for accounting and actuarial assumptions. While absolutely nothing changed with the assets or internals of a pension fund, the publicly announced calculation of unfunded liabilities soared. Some could argue that this was better disclosure, while others assert that it was an unnecessary pressing of the panic button. But the intent, or pre-programmed outcome, worked to serve its purpose.

Was more Federal control of state and local pensions now shown to be necessary? Would this reduce local control as the freezing of independence from CalPERS just indicated? Would further regulation govern possible investment choices and therefore affect capital flows? Certainly a transition to Federal control is the next step toward global control. Is this what is really going on? Is Amador County being colonized, or did we get the royal screw just by coincidence?

Copyright 2017, Mark L. Bennett