Your Survival Guy

Preparing your investments and family for when disaster strikes.

Disclosure

  • Home
  • Your Survival
    • Special Report: FOOD SHORTAGE: Crazed Hoarding Is Not Preparing
    • Your Survival Guy’s Super States
    • Constitutional Carry
    • EMP Threat
    • Tucker Explains
    • Newport Gas Outage
    • Water
      • Emergency Water Storage
      • Let There Be Water
    • Get Your Gun and Your Training Now
    • Satellite Phones
    • Navy SEAL Survival Kit
  • Your Money
    • Coronavirus Infects Stock Market
    • Looking for a Better America
    • You Invest, They Win
    • Where to Keep Your Cash
    • Paris
    • How to Buy a Boat
    • Dead or Alive? The Future of Long-Term Investing
    • Is Vanguard too Big?
    • Cryptocosm and Life After Google
    • The Last Intelligence Report
    • The Truth Behind the S&P 500
    • RAGE Gauge
    • How Many “Retirees” Will Keep Working?
    • Your Retirement Life
    • You’ll Love This if You’re Dreaming of an Active Retirement Life
  • Weapons
    • Self Defense
    • Every Family Should Own at Least One Shotgun: Here Are Three
  • About Me
    • Your Survival Guy: “Life on Main Street Hasn’t Been This Hard in a While”
    • Preparing for Times Like These
    • My Videos/Pics
    • Music
      • RIP Neil Peart: You Will Always Be Remembered as a “Modern-Day Warrior”
    • Your Survival Guy: Make Your Bed and The Hero Code
  • You
    • Our Cabin on Kodiak, Alaska
    • If You Are in Pain, this May Help. It Helped Me.
    • How to Save for a Grandchild
    • FIRE! Financial Independence, Retire Early
    • Compound Interest
    • Arithmetic of Portfolio Losses
    • Maximum Portfolio Withdrawal Rate
    • An Efficient Frontier
    • Retirement Compounders
    • Counterbalanced Total Returns
  • Survive & Thrive
    • August 2022
    • July 2022
    • June 2022
    • May 2022
    • April 2022
    • March 2022
    • February 2022
    • January 2022
    • December 2021
    • November 2021
    • October 2021
    • September 2021
    • August 2021
    • July 2021
    • June 2021
    • May 2021
    • April 2021
    • March 2021
    • February 2021
    • January 2021
    • December 2020
    • November 2020
    • October 2020
    • September 2020
    • August 2020
    • July 2020
    • June 2020
    • May 2020
    • April 2020
    • March 2020
    • February 2020
    • January 2020
    • December 2019
    • November 2019
    • October 2019
    • September 2019
    • August 2019
    • July 2019
    • June 2019
    • May 2019
    • April 2019
    • March 2019
    • February 2019
    • January 2019
    • December 2018
    • November 2018
    • October 2018
    • September 2018
    • August 2018
    • July 2018
    • June 2018
    • May 2018
    • April 2018
    • March 2018
    • February 2018
    • Welcome

The Problem Plaguing California is About to Hit the Entire Country

August 20, 2019 By E.J. Smith - Your Survival Guy

Homeless camp on a sidewalk in downtown Los Angeles, makeshift shelters made from tents and blankets. By Simone Hogan @ Shutterstock.com

In the Orange County Register, veteran California journalist and political analyst Dan Walters, examines the hard choice facing city officials in Sacramento, and state officials in California. The problem both governments have is their pensions.

Despite problems with its pensions, Sacramento officials are already thinking up ways to spend money they haven’t received from future taxes on things like “infrastructure, affordable housing, cultural amenities and incentives to attract new business,” while ignoring the massive hole in the city’s retirement funding. Walters writes:

As they pore over proposals to spend Measure U money, however, Steinberg, et al, try to avoid the financial gorilla that is prowling city hall – rapidly rising costs of pensions for city employees that threaten to soak up all the money.

The city’s current budget declares that over the next five years, mandatory payments to the California Public Employees Retirement System (CalPERS) will increase by 58 percent or $47.3 million a year – almost exactly what the extra half-cent of sales tax in Measure U would raise.

Most of that money is directed at reducing the immense unfunded liabilities that CalPERS acquired during the Great Recession a decade ago and has not been able to erase despite an extended period of economic prosperity. Recently, CalPERS reported that its earnings during the preceding year fell a bit short of expectations, which means its unfunded liabilities grew even more.

Eventually, to meet its ever-increasing pension payments, Sacramento will either have to use Measure U’s revenues, thus setting aside the ambitious civic improvements Steinberg and others want to make, or cut other city services. It’s simple, inescapable arithmetic.

Sacramento certainly isn’t alone. Throughout California, as pension payments accelerate faster than property and sales tax revenue, city officials are facing similar tradeoffs and/or asking their voters to raise taxes.

A new study by UC-Berkeley Professor Sarah Anzia, using data from a variety of sources, sees it as a nationwide problem. “My analysis here,” Anzia writes, “shows that as local governments spend more on pensions, they have fewer public-sector jobs to offer – an implication that is not positive for government employees or their unions.”

Anzia foresees a “pension-induced transformation of local government” and suggests that “the future of local government may look very different than the past” as a result.

Public pension funds are in trouble around the country. Much of the cause of the pension problem is rooted in unrealistic return expectations. Pensions are typically balanced funds, with averaged assumed rates of return of 7.5%. A typical fund will invest about a third of its assets in fixed income. Those return expectations are unrealistic today with yields in the bond market are extremely low. For example, the 10-year treasury rate is near an all-time low (see chart below).

As Walters indicates, when municipalities believe their pension funds will earn unrealistically high returns, they spend money they should have saved on other priorities. With that money gone, administrators are forced to come back later, hat in hand, looking for more revenue. The phenomenon is not isolated to California. I’ve been noting bad pension behavior all around the country for years. Here’s a sample of the carnage:

  • Illinois: New Governor, Same Old Pension Pyramid Scheme
  • American Municipalities Offer Less Info, More Debt
  • Is Your State’s Pension System about to Collapse?
  • New Michigan Law Reveals Big Trouble
  • Fuzzy Math Can’t Hide This State’s Pension Trouble Anymore

If you’re living in a state or city (or both) with a vastly underfunded pension, you can expect to be asked to pay more in taxes, later on, to make up for the lack of proper pension saving today.

The following two tabs change content below.
  • Bio
  • Latest Posts
My Twitter profileMy Facebook profileMy Instagram profile

E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zildjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com
My Twitter profileMy Facebook profileMy Instagram profile

Latest posts by E.J. Smith - Your Survival Guy (see all)

  • Your Survival Guy’s Favorite Number is 72: Here’s Why - August 11, 2022
  • WHOLE FOODS CEO: “Socialists Are Taking Over” - August 11, 2022
  • MAJOR WARNING ON FOOD SHORTAGES: Businesses Prepare for Violence - August 11, 2022
  • BLUE STATE BLUES: There’s No Way Out of This for Democrats - August 10, 2022
  • Joe Manchin Has Broken Multiple Pledges to the American People - August 10, 2022

If you enjoyed this post, email it to a friend:

  • Email
  • Print
  • Facebook
  • LinkedIn
  • Twitter
  • WhatsApp

Related Posts

Money 101

Trending

  • Survive and Thrive August 2022: “Watch This Boat off Our Stern,” My Dad Said “He’s Coming in HOT”
  • NO GO ZONES: The Wealthy Protected, the Rest Left to Rot
  • 80 Year Old California Shop Owner Shoots Rifle-Wielding Intruder's Arm Off
  • WATCH OUT: The IRS Made New Changes to Your IRA
  • DESANTIS RESISTS: Suspends Soros-Funded Destruction of America
  • Here's Where Americans Want to Move
  • PRIMARY RESULTS: Pro-Trump Candidates Clean Up
  • New Secret Weapon is Like Dropping Anvils on Terrorists Heads
  • Record Breaking Slowdown in Housing Price Growth
  • Do You Have $500,000 in Savings? Avoid This Nightmare

Must Reads

  • “Talk to Me, Goose!” Time Flies in Top Gun: Maverick
  • Your Best State on Guns, Plus the 8th Wonder of the World
  • INTRUSIVE GOVERNMENT SURVEILLANCE: Does This Make You Feel Safer?
  • Here’s Why You Need a 15-Year Retirement Investment Plan
  • Why Mutual Funds and ETFs No Longer Work
  • Your Survival Guy’s 2022 Super States: #1 New Hampshire
  • GAME ON! Lessons from Street Hockey on Baker Lane
  • Get Out the Map, Make a Plan, and MAKE IT HAPPEN
  • Your Survival Guy’s Fishing Stories: From Key West to Newport
  • Slow and Steady Wins the Race: Most People Can’t Handle Making Money This Way
Only if You’re Serious
Crazed Hoarding Is not Preparing
How to Save Rainwater Effectively
Your Survival Guy in Paris
Your Survival Guy's Fishing Stories
Financial Independence, Retire Early
Money 101
Pandemic Creates Virtual Panopticon
Emergency Water Storage
Find Freedom in America
Second Amendment
How Can You Save Money for Your Grandchild
Great Reset
See Who's Missing the Boat
Richard  Young Reports
How You Can Save Money for Your Grandchild
Why Fidelity is Number One
The Best States for Survival
You Invest, They Win
Escape the City
Why Vanguard is Too Big for YOU
Island Life

Copyright © 2022 | Terms & Conditions

loading Cancel
Post was not sent - check your email addresses!
Email check failed, please try again
Sorry, your blog cannot share posts by email.