Tuesday, August 31, 2010

Scwarzenegger on his way out in California.

This fall Arnold will be passing over the reins as Governor in the State of California.

It has been a challenging time for California as it has been battered by the recent recession. The recession has caused huge problems for the state's finances. Much of the focus has been on the high cost of employees on the public payroll.

Epicenter for Pension Meltdown
California has become the epicenter for the discussion on how the US and Canada will run its governments.

Arnold is disappointed with the lack of results he has had in reforming the system and is acutely aware of the long term problems taxpayers face. He recently had an editorial in the Wall Street Journal that illustrated his frustrations and his worries.

His editorial was called Public Pensions and Our Fiscal Future. I have referred you to the link at Pension Pulse for a reprint of the editorial.

In the editorial Arnold points out those things of most concern to him:
Here's the plain truth: California simply cannot solve its budgetary problems without addressing government-employee compensation and benefits.
Roughly 80 cents of every government dollar in California goes to employee compensation and benefits. Those costs have been rising fast. Spending on California's state employees over the past decade rose at nearly three times the rate our revenues grew, crowding out programs of great importance to our citizens. Neglected priorities include higher education, environmental protection, parks and recreation, and more.
These comments reflects the view of this Blog and one we have tried to highlight over the past few years. Specifically on comments about pensions Arnold has this to say:

Much bigger increases in employee costs are on the horizon. Thanks to huge unfunded pension and retirement health-care promises granted by past governments, and also to deceptive accounting by state pension funds (such as unreasonable projections of investment returns), California is now saddled with $550 billion of retirement debt.
This year, retirement benefits—more than $6 billion—will exceed what the state is spending on higher education. Next year, retirement costs will rise another 15%. In fact, they are destined to grow so much faster than state revenues that they threaten to suck up the money for every other program in the state budget.
Few Californians in the private sector have $1 million in savings, but that's effectively the retirement account they guarantee to public employees who opt to retire at age 55 and are entitled to a monthly, inflation-protected check of $3,000 for the rest of their lives.
The Protected Class 
You might say too bad for California but what has it got to do with me?

It does not matter where you are in Europe or in North America the problems in your local, city, state, provincial or federal government are all the same. Most taxpayers are aware of the problem in the US but unfortunately the mainstream media in the Nanny State here in Canada see no problem. Canadians know nothing about the problem are a completely apathetic.

Unfortunately the longer Canadians put their head in the sand the harder it will be to repair the system that is on its way to meltdown. Here in Canada we offer the same benefits and pension as those in California.

These are a couple of charts that Arnold has been taking on his recent visits to media and policy meetings. You can be assured that the numbers reflect the same trend in your local governments. Unfortunately no one is prepared to address or talk about the problems.  

Flurry of Outrage

Of course there has been a flurry of outrage from the representatives of the Protected class. Their spokespersons are the unions.

In order to counter the blow-back from his editorial Arnold has been forced to defend his position. He did this recently in an media interview. Schwarzenegger Calls For Pension Reform  

Here is how he  addresses the taxpayers for California.

* Roughly 80 cents of every government dollar goes to employee compensation and benefits, and those costs have been rising fast.
* Worse, much bigger increases in employee costs are on the horizon.
* All of that debt was created without the citizens' knowledge, much less their approval.
* This year, the state is spending more than $6 billion on retirement benefits, exceeding what   we're spending on higher education.
* for years I've asked the legislature to stop adding to pension and retirement debt, but they have refused to do so.
*  Because it is not their money they are spending, it is yours.
* You see, they have never signed the check on the front.
* They always sign the check on the back.
* They are very good at doing that.
If this was their own money, all this would come to a grinding halt. -
But it is your money

Not In My Backyard!!!
Many reading this will say.... come-on our politicians and pensions experts are telling no problem exists! Of course no problem exists they are part of the Protected Class, all on taxpayer funded pension plans. 

What Canada desperately needs is a high profile pension champion in the mainstream media. This has emerged in the US with some thoughtful and analytical journalists critically assessing what is really happening. One of these is Columnist and author Steven Greenhut who left a full time job at a California newspaper to cover the pension issue. His most recent article is How severe is the public employee pension problem across the U.S.? He also authored a book called Plunder - How Public Employee Unions are Raiding Treasuries, Controlling Our Lives and Bankrupting the Nation 
The Protected Class has long represented the pension issue with much misinformation and hiding of facts. It has been hard to uncover the relevant facts and issues. One attempt recently in San Diego is Top 20 pensioners cite city service. More of this type of coverage is required on all levels of government.  

Local Issues
In my home town and province many issues have been surfacing that have been ignored by the local media. 

In California the current budget deficit is around $ 19 Billion. It is the same $19 Billion in my Province of Ontario. Schwarzenegger vetoed passing of  the recent budget until reform is in hand and there is a plan in place to control the deficit. In Ontario it is business as usual, with hardly any mention of the current budget deficit. Despite the fact Ontario's economy is much smaller than California. 

Waterloo firefighters get 4.2% - despite McGuinty’s call for a wage freeze 
Province’s wage-freeze talks go off the rails 
Province won't bail out faltering university pension plans

Canada is ready for a pension champion... but I wont hold my breath they all are on gold-plated taxpayer funded pensions already!

Bill Tufts 
Fair Pensions For All

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