Either California Supreme Court, Or Bankruptcy, Will Solve $1 Trillion Pension Time Bomb (San Francisco: homes, transfer)

[USDefault]

Financial doomsday tolls for California's cities, towns, and schools.

CalPERS recently reduced its laughable 7.5% projected investment returns to 7% by fiscal year 2019. Yet even this reduced projected return rate is far, far too optimistic. For fiscal year 2016, CalPERS reported investment returns of an abominable 0.61%, and an anemic 2.4% the prior year. Thus even the the lowered 7% projected return is provably false and utterly baseless. It will never be achieved. CalPERS should cut its investment projections in half, and only then are we in the same universe as reality.

But it gets worse. Much worse. Many other California pension funds still need to lower their projected investment returns as well, including many towns to major cities like LA and San Francisco, all the way up to the major state pension funds. Just one example of grossly inflated investment return projections is the $188.4 billion CalSTRS, which currently projects investment returns of 7.5%. This number is false, baseless, fraudulent.

Just wait until all the underwater pension plans across California reduce their expected investment returns to something approaching reality, which they must. Reality-based investment return projections across the California pension spectrum will result in shockingly large accelerated transfer payments to be born by towns, cities, and school districts. The payments required to fully fund these pensions will be so massive, they will bury California in nearly $1 trillion in red ink. The simple fact is, these amounts cannot be paid. Simply cannot. And that which cannot be paid, will not be paid.

The time now rapidly approaches when the math does not work, and the bills cannot be paid. Either pension benefits will be reduced (which they must), or insolvency will be declared.

There is a glimmer of hope for the former. Pension reformers now hope the California Supreme Court will allow reduced and renegotiated pension benefits for current and future retirees. Another reason for hope: the California appellate courts have already ruled California pensions are not "immutable." The article notes California now is facing an unfunded pension liability problem approaching $1 trillion:

But that could change if the state Supreme Court upholds a ruling that pensions are not "immutable." According to court documents, a three-judge panel in the Court of Appeals in the 1st Appellate District concluded that while a public employee has a constitutionally protected right to a pension, that right extends only to a "'reasonable' pension." And the legislature is permitted to alter benefits for existing employees -- not just future employees.

And a ruling in support of the California Appellate Court will put much-needed pressure and leverage on California's greedy public unions:

If it upholds the appellate court's ruling, it could spur on more productive negotiations with unions, Nation said.

"I think the most important thing that will happen is employee union groups are going to say, 'OK, this is not a sure bet any more. Pensions actually can be reduced. We need to sit down and talk.' That's what I hope happens," he said. "If the court does end up there, it will change the dynamics of that process. And help save the system."

And if this effort fails, it will be lights out for California pensions. Towns, cities, and school districts will follow in the footsteps of San Bernardino, Stockton, Vallejo, and Mammoth Lakes, all of which declared bankruptcy and challenged pension payments. Future bankruptcy filers will take it entirely outside of California law, because bankruptcy court is exclusively a federal court and federal law controls -- not California law.

San Bernardino, Stockon, Vallejo and Mammoth Lakes are the proverbial coal-mine canaries. And the recent CalPERS return projection reduction is but the start of the chain reaction that will cause the entire system to go supernova. It is going to happen. It is a mathematical certainty. And in the battle of unions/politicians versus math, math always wins. Always.

[Perma Bear]

Originally Posted by USDefault

Financial doomsday tolls for California's cities, towns, and schools.

CalPERS recently reduced its laughable 7.5% projected investment returns to 7% by fiscal year 2019. Yet even this reduced projected return rate is far, far too optimistic. For fiscal year 2016, CalPERS reported investment returns of an abominable 0.61%, and an anemic 2.4% the prior year. Thus even the the lowered 7% projected return is provably false and utterly baseless. It will never be achieved. CalPERS should cut its investment projections in half, and only then are we in the same universe as reality.

But it gets worse. Much worse. Many other California pension funds still need to lower their projected investment returns as well, including many towns to major cities like LA and San Francisco, all the way up to the major state pension funds. Just one example of grossly inflated investment return projections is the $188.4 billion CalSTRS, which currently projects investment returns of 7.5%. This number is false, baseless, fraudulent.

Just wait until all the underwater pension plans across California reduce their expected investment returns to something approaching reality, which they must. Reality-based investment return projections across the California pension spectrum will result in shockingly large accelerated transfer payments to be born by towns, cities, and school districts. The payments required to fully fund these pensions will be so massive, they will bury California in nearly $1 trillion in red ink. The simple fact is, these amounts cannot be paid. Simply cannot. And that which cannot be paid, will not be paid.

The time now rapidly approaches when the math does not work, and the bills cannot be paid. Either pension benefits will be reduced (which they must), or insolvency will be declared.

There is a glimmer of hope for the former. Pension reformers now hope the California Supreme Court will allow reduced and renegotiated pension benefits for current and future retirees. Another reason for hope: the California appellate courts have already ruled California pensions are not "immutable." The article notes California now is facing an unfunded pension liability problem approaching $1 trillion:



And a ruling in support of the California Appellate Court will put much-needed pressure and leverage on California's greedy public unions:



And if this effort fails, it will be lights out for California pensions. Towns, cities, and school districts will follow in the footsteps of San Bernardino, Stockton, Vallejo, and Mammoth Lakes, all of which declared bankruptcy and challenged pension payments. Future bankruptcy filers will take it entirely outside of California law, because bankruptcy court is exclusively a federal court and federal law controls -- not California law.

San Bernardino, Stockon, Vallejo and Mammoth Lakes are the proverbial coal-mine canaries. And the recent CalPERS return projection reduction is but the start of the chain reaction that will cause the entire system to go supernova. It is going to happen. It is a mathematical certainty. And in the battle of unions/politicians versus math, math always wins. Always.

Remember kids: don't take gold bug fear monger blogs as fact.

[V8 Vega]

Services are already being cut back so your tax money goes to pay their lavish pensions. Try calling the dog catcher for instance and see what happens. Nothing.

[PickupthePieces]

A great many (as in dozens of towns, school systems, etc) are looking at what bankruptcy options they have. There was a report that Stockton, should the pension crisis get severe, would go back and do a second BK.

Just let that sink in. All the people here who post nonsense about how CA is the six this and that, just contemplate that the pension crisis in CA is so bad one of the largest towns has already filed, and is in exit and still may file again.

I don't know who in their right mind moves to CA, but it isn't smart money.

[Perma Bear]

Originally Posted by PickupthePieces

A great many (as in dozens of towns, school systems, etc) are looking at what bankruptcy options they have. There was a report that Stockton, should the pension crisis get severe, would go back and do a second BK.

Just let that sink in. All the people here who post nonsense about how CA is the six this and that, just contemplate that the pension crisis in CA is so bad one of the largest towns has already filed, and is in exit and still may file again.

I don't know who in their right mind moves to CA, but it isn't smart money.

Why are you here then?

[PickupthePieces]

Originally Posted by Perma Bear

Why are you here then?

In turn - and you?

I would say most of America has no idea several states are insolvent. California is the largest of them. That is real news.

[Perma Bear]

Originally Posted by PickupthePieces

In turn - and you?

I would say most of America has no idea several states are insolvent. California is the largest of them. That is real news.

Oh okay so you read gold bug blogs got it. I'm forced to live in the state.

[PickupthePieces]

Originally Posted by Perma Bear

Oh okay so you read gold bug blogs got it. I'm forced to live in the state.

Wake up and smell the CA economy - It's not just gold bugs. Litterally hundreds of cities are at risk and will default depending on how this plays out, including LA, SD and many others. There's a hand full that won't have to file.

LA is already at a level where they have reduced spending on services for the public.

You see Chicago? That is LA's future.

[Perma Bear]

Originally Posted by PickupthePieces

Wake up and smell the CA economy - It's not just gold bugs. Litterally hundreds of cities are at risk and will default depending on how this plays out, including LA, SD and many others. There's a hand full that won't have to file.

LA is already at a level where they have reduced spending on services for the public.

You see Chicago? That is LA's future.

It's hard to see this "coming economic collapse" when 2 bedroom 1 bath homes in Belmont sell for 1 million dollars. Just not seeing it. As much as I'd love to believe you're right we're just getting richer and richer.

[StanleysOwl]

Read page 5 of the CalPERS Facts at a Glance
https://www.calpers.ca.gov/docs/form...t-a-glance.pdf
Do the simple math of averaging returns.
If you are still suffering angst, just shoot yourself. The rest of us wont miss you a bit.