Posted on 01/22/2007 9:58:08 AM PST by NormsRevenge
Barring some cataclysmic natural disaster or terrorist act, the biggest crisis of the next few years on the local and state government front is likely to be the fallout from new accounting rules ordered by an obscure agency, the Governmental Accounting Standards Board (GASB). They mandate that public agencies calculate and reveal their long-term unfunded liabilities for pension and health-care benefits owed to retired employees.
When these reports are finally released, they will amount to a day of reckoning for literally thousands of school districts, cities, counties and dozens of states that have recklessly bestowed unfunded lifetime benefits on public employees. Many government agencies across the nation have done the prudent thing and already begun addressing their long-term debt by setting aside money or reducing benefits – the only two options to deal with the problem.
This list most definitely does not include the state of California. Instead, Gov. Arnold Schwarzenegger wants to put off the state's day of reckoning as long as possible. Finance Director Mike Genest says the state's report on unfunded liabilities won't be released until March 2009. Until then, nothing will be done. In practical terms, this could mean the earliest the problem will be addressed is the fiscal year starting July 1, 2010 – six months before Schwarzenegger leaves office.
State officials contend it wouldn't be prudent to do anything until a full actuarial evaluation is complete and until a newly named commission offers its recommendations. They note that bond-rating agencies appear satisfied with California's approach.
Nevertheless, given that the state already has very solid evidence that its unfunded liabilities are massive, it is a dodge, pure and simple, to argue that prudence dictates doing nothing as the problem gets much worse. That evidence: The Legislative Analyst's Office reported last February that the state had $40 billion to $70 billion or more in unfunded retiree health care obligations, and urged that $6 billion a year be set aside to prepare for this coming tidal wave.
Meanwhile, while GASB may allow California to wait two years to issue its final report on unfunded liabilities, it is not at all clear the state can pretend in the mean time those liabilities do not exist. Accountant Marcia Fritz, a GASB expert and former CalPERS consultant, believes that “by not addressing the [unfunded liabilities and how they will be paid for] in this year's budget process, there is a material omission of facts and misapplication of accounting principles related to disclosure ... .”
In other words, state officials are acting in ways that would have corporate boards fighting fraud charges. Certainly, Genest's recent assertion that the state's structural deficit had been tamed amounted to “a material omission of facts,” given the LAO report.
This is not what Californians signed up for when we installed Schwarzenegger in the 2003 recall election. He promised “action, action, action” in dealing with the state's problems and a new honesty on the budget. Instead, we now have the spectacle of his administration insisting it would be “imprudent” to attack a fiscal problem it knows to be gigantic. Californians deserve better, much better, from the leader we just re-elected.
Liberals believe in lots of Free Stuff from the government and vote for it joyously every chance they get.
Conservatives are sceptical about Free Stuff and suspect that someone, somewhere will have to pay for it.
If you're a wage earner or, worse yet, a property owner, you soon find out who that someone is.
We will now be told that this is part of a larger strategy for good government conservatism (wait...any minute now.....)
If you are from elk grove il, you should know your state is not far behind Cali in unfunded liabilities. Wisconsin is in aweful shape as well.
This from the San Diego Tribune??? LOL, the city that is being investigated by the SEC for issuing bonds without disclosing its epic shortfall in funding future liabilities.
http://www.sddt.com/Reports/reports.cfm?RID=216
Why not include the federal government in this? Also require them to add social security and medicare.
What if I'm not?
Our relatively new mayor here in San Diego wants to solve our fiscal crisis in part by outsourcing as much as possible and by laying off municipal employees. The new requirements of the GASB that the cost of long term commitments be shown on city, county and state financial statements should add impetus to outsourcing. Private contractors have been at an unfair disadvantage because they have had no choice but to consider long term employee costs when bidding a job, whereas the similar costs of government employees have been hidden.
And in the meantime, we will see another $50 billion in borrowing (modest prediction). WASS!
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
And that's the whole problem. The idiots that make up local government have no one to answer to but the voters. The investors don't count and the voters are stupid. Sooner or later those investors go away. Can you imagine a world without municipal bonds? I can't. That is DEFINITELY where we are headed. No reliability, no money.
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