El Dorado County's Pension Problem Is Getting More Expensive
If you're a taxpayer in El Dorado County, loosely translated from the Spanish as "the golden one", you may be getting the shaft.
And if you're a county taxpayer soon to be retiring from a state county or municipal job, that shaft may be a little deeper. New this holiday weekend, word that El Dorado County's big underfunded pension liability is getting much bigger
The timing is curious.
County controller, Joe Harns put out a press release at the start of the Labor Day weekend, hoping perhaps it wouldn't be widely read. It contained the last multimillion-dollar fiscal missile fired by CalPERS:
The county controller didn't include a roll of antacids with his latest pension funding shortfall news release, but some could use it. The latest numbers, as of July of 2016, finds another 64 million dollars in money that has to be there but isn't.
Controller Joe Harn put the blame clearly in what many call the dysfunctional investment strategy of CalPERS.
"The huge increase in CalPERS costs is going to adversely affect our fire districts as they continue to attempt to provide fire and emergency medical services in our county."
A county which seems to have batches of forest and wild fires seasonally.
Harnes' update stressed the fresh news but it doesn't tell the whole story. Mike Owen a CPA and small business owner trying to unseat the controller next summer, says the cumulative pension money gap is much worse. If 64 million is a Rolaid's moment...this number might need a prescription strength antacid.
"350 million is the number we're looking at. 2011 it was 175, 000. They bounce around depending on investment performance these are numbers that are hard to control."
In fact, it's more of a whisper number since they don't appear in the county balance sheet. Unlike most union or corporate pensions, investment losses are absorbed by the pension plan members---not the so-called sponsors, the state, county and local governments or fire districts.
CalPERS has long been a political piñata for El Dorado County's congressional representative Tom McClintock, who says it's set up to lose money, by a unique investment strategy.
While El Dorado County's underfunded millions are painful, Congressman McClintock says that pain is being shared all over California"
"It's 5.4 billion state wide, 8 years ago it was half of that, 8 years before that it was one 75th of that."
When the legislature ok'd the state run pension behemoth to start paying out pension benefits as early as age 55, it added a vast new poll of retirees, and compounded that by assuming annual returns in the then bull markets would last forever. They did not. Once tying its model funding to an assumed 14 % return rate around 2000, the dot com bubble exposed that strategy as risky many years since, CalPERS has lagged behind Wall Street and even mom and pop. Losing billions in a big portfolio of foreign investments and mortgage backed securities that paved the way for the last great recession. Many have argued that CalPERS so called global view of socially responsible investing is a blueprint for failure.
Getting away from CalPERS isn't a viable option---
For El Dorado County, quitting the CalPERS system would cost more than one billion dollars.
In fact--CalPERS has bond positions in Washington Mutual, Bear Stearns Indy Mac--and Lehman Brothers, and countrywide, five firms that were too big to fail but did----in the 2007-2008 mortgage security melt down.
Its dumped lucrative,though volatile, hedge funds and while it's mission is supposed to be socially responsible investing the portfolio hosts several gambling stocks, a few oil companies and at least one tobacco giant Altria-- the maker of Marlboro. It also invests more in the UK than US treasuries and has positions in the governments of China, Pakistan and Russia - not exactly America's international welcome wagon.
