California Budget Insanity: Education Pension Edition
The California Foundation for Fiscal Responsibility (CFFR) has obtained and posted “The CalSTRS $100,000 Pension Club” — a list of more than 3,000 retired educators who are receiving pensions of $100,000 or more per year. You can access the list in PDF here.
These large lifetime pension promises are one explanation for why school districts have less money to spend on current employees even as per-pupil funding has increased and enrollment has decreased. These pension obligations will continue to encroach on the operating funds of these districts.
This is compounded by Golden handshakes where teachers get to retire early with lucrative pensions, thus extending the long-term obligation for short-term gain.
See Reason on the Gathering Pension Storm here.
Yikes123 | June 2, 2009, 12:48pm | #
here's a doozy for you:
Contra Costa County’s First 5 Commission has blown nearly $2 MILLION of its pension contributions!
From their 06/01/09 Agenda (on their website):
“Update on the pension UAAL
… staff have met with First 5’s actuarial consultant to review the results of a recent study estimating First 5’s assets within the CCCERA retirement fund. The study was commissioned in anticipation of considering whether First should move its retirement to CALPERS. The study found that, based on CCCERA’s standard calculations, First 5’s assets are calculated in the negative range. “
Yes folks - they said Contra Costa's PENSION ASSETS ARE NEGATIVE NUMBERS!
So, people, looking at Contra Costa’s latest audit report (07/08 from their website) to get a point of comparison, it shows that this First 5 Commission contributed, for the past three fiscal years, a total of $949,920 to its employee pension plan, with an annual growth rate of 18%.
If you go back for another 4 years to probably when this First 5 started to have some number of staff, and assume just a 15% growth in the contribution over the 4 years, the expected total of contributions for FY 00/01 through FY 07/08 would be about $1,775,000 in total pension contributions.
So, here are my questions:
1. WHERE exactly did nearly $2 MILLION dollars go?
IMO, even if the stock market was down 50%, then you could expect that pension value to maybe be about $1 million, which is still ridiculous, but it being in negative territory reflects a level of investing ineptitude. Who should be held responsible for that? Well, it should be the Board's Finance Committee.
Note that the agency will have to make up the $1.7 million first just to get back to ZERO, and then come up with a lot more to cover its legal obligation. So the real need to cover their future obligations is probably more like $3 - 4 million just to get to a point of stability.
Do they intend to take this money from the funds directed to kids? It bothers me and shouldn’t that bother those who believe that First 5’s are doing such great work, like Marie Lakin at the Making Waves blog at the Ventura Star? Because this First 5 will have to take the money from somewhere and it does not grow on trees. So, IMO, it would not be the taxpayers taking money away from First 5’s, it would be inept management and/or investors; how is that more ok? To me it is not.
2. Will Contra Costa’s next audit report for FY 08/09 actually print that they are in negative pension value land? Are they going to try to fudge the study’s assumptions so that it does not look so bad by the time the fiscal year ends?
IMO, even if it were just $1 million (when it’s clear it’s more like $3 million minimum), that amount is easily material and significant from an accounting perspective. As the agenda also says, their 09/10 budget is to be about $17 million – so even just using the $1 million number shows the problem is greater than 5% of their budget - and in accounting circles - that means it is significant and/or material. It’s not probably very disputable, so I do not think it can be hidden by just showing the annual pension contribution expense – it’s really just too large and so I believe their auditor will make them disclose it and perhaps issue a finding.
Again, folks, IMO something’s wrong here; public documents clearly show it.
for more on the First 5 agency problems including Board self dealing and spending $100 million+ on evaluators, see