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I wonder how much real estate California bought with taxpayer money during the real estate bubble that families lost out on?
Seems like California pretty much dumped California taxpayer money into the stock market and into real estate because the many California government employees will get payouts in the millions.
If Republican don't win the majority in November, the Democrats are going to bail out those seven-figure pension payouts that the blue states gambled away in the stock and real estate markets.
The California pension's have huge cost of living adjustments also.
Only 10% of the teacher's pension is in fixed assets and the vast majority of the rest is in equities and real estate.
Pension funds like to be in AAA bonds. When they are paying 0.1%, it forces pension managers to look for returns elsewhere. When housing and equities are in soaring bubbles, it is hard for pension managers not to load up on them.
Many pension funds took a huge haircut in the 2009 housing collapse. I mean, Iceland went bankrupt from it after all.
My guess is, at this time, pensions funds are much higher today than they would have been if they had sat in 0.1% return investments rather than riding the asset bubble to the moon, and then experiencing some bounce back. With 2 year treasuries pushing 4%, I am sure many pension fund managers are transitioning out of assets and into fixed investments.
tl:dr - they made a lot more money in the rising market than they are losing in the falling market, so long as they get out now and don't ride to the bottom.
While it is nice to have a guaranteed cost of living adjustment, I don't see 2% as "huge".
My undestanding is, only a minority of Calpers retirees get a COLA over 2%. Police and Fire get 5%, which is big. I think teachers get 3% but I could be wrong. Somebody can correct me on that.
The overwhelming majority of Calpers retirees get a 2% COLA.
Inflation was 9.6%.
Wage growth for US workers was 10% year over year, so more than "reported" inflation.
Compare a typical 2% COLA for Calpers retirees vs a likely 8% COLA coming for social security beneficiaries this year. 8% is not even "huge" against 9% inflation.
2% COLA sounds pretty small to me, but what do I know? It feels huge when you are paying for it with your tax dollars while you are getting killed by soaring inflation.
Pension funds like to be in AAA bonds. When they are paying 0.1%, it forces pension managers to look for returns elsewhere. When housing and equities are in soaring bubbles, it is hard for pension managers not to load up on them.
Many pension funds took a huge haircut in the 2009 housing collapse. I mean, Iceland went bankrupt from it after all.
My guess is, at this time, pensions funds are much higher today than they would have been if they had sat in 0.1% return investments rather than riding the asset bubble to the moon, and then experiencing some bounce back. With 2 year treasuries pushing 4%, I am sure many pension fund managers are transitioning out of assets and into fixed investments.
tl:dr - they made a lot more money in the rising market than they are losing in the falling market, so long as they get out now and don't ride to the bottom.
They were probably gambling on the stock market and enjoying the ride up late in the game when they were boasting about those surpluses. Other countries like Sweden and Saudi Arabia have sovereign wealth funds and invest directly in financial markets, equities, etc. California acts like a mini country so they probably have something like that going on.
Report: California's unfunded pension debt could swell to $285 billion
(The Center Square) – California's unfunded pension liabilities could swell to more than $285 billion in 2022, depending on investment returns, a new report from the Reason Foundation estimates.
The forecast, produced by the Reason Foundation's Pension Integrity Project, estimates that unfunded pension liabilities could grow to $232.98 billion if California's major pension plans report -6% returns in 2022 and $285.57 billion if plans report -12% returns. That would represent a dramatic shift for the state, which had $131.57 billion in unfunded pension liabilities in 2021, according to the Reason Foundation.
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