Friends With Benefits - Part 16 In Good Times and In Bad?

Daniel Borenstein writes for the Contra Costa Times and is published locally in the S.M. Mercury Times.  He's written a piece that is the first fresh bit of insight into how some of the public pensions are digging an even deeper hole than the estimated half trillion dollars

Pension plans depend on investment returns to help fund workers' retirement payments. Systems for public employees assume that good years will outweigh the bad and over time provide average annual growth of 7 to 8 percent.

But what happens if they skim off money during good years? It doesn't take a financial genius to figure out that will drag down investment returns. Yet, that's exactly what San Jose and Alameda County pension systems do.

We're talking tens of millions of dollars in San Jose and roughly $1 billion or more in Alameda County. These misnamed "excess earnings" -- there's nothing excess about them -- are diverted to other benefits.

He goes on to note

The city (i.e. San Jose) established the diversion programs in 1986. They are modeled after a state law that permits similar transfers for county-level pension systems. Alameda is one of only three counties -- Tulare and Kern are the others -- that take advantage of that law. The Alameda County program dates to 1985.

So it appears that San Mateo County is not diverting funds.  One wonders about the individual cities and towns in the County?  Here's another state law ripe for repeal since it ignores the basic concept of averaged long-term returns that is essential to pension funding.

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[Lorne]

From local columnist John Horgan:

Will Tom Huening's Voice Be Heard?
San Mateo County's government operation based in Redwood City is often a one-trick pony. Serious debate on major issues frequently lacks much staying power. That's because the overwhelming majority of the decision-makers speaks with one political voice which leans heavily liberal and Democrat. This circumstance tends to constrict any sort of healthy give-and-take on important matters of substance. That's where Tom Huening comes in. As a generally conservative County Controller, he's regarded as something of an alien in the halls of county administration. So there is a real question as to whether his latest alarms will be heeded, especially by the Board of Supervisors. He's been warning about two potential budget-busters for some time: Unfunded government employee pension liabilities and the annual cost of debt service for a proposed new County Jail. He has plenty of facts and figures to back up his red flags. But it will take some real gumption on the part of the supes to act on his findings. Are they paying attention? Dave Pine certainly is. As for the rest, well, we're waiting.