MyGovCost News & Blog

Dallas Public Employee Pension Wrecks City Credit


Thursday January 19th, 2017   •   Posted by Craig Eyermann at 6:18am PST   •  

26994779_s Last December, the mayor and city council of Dallas, Texas, acted to stop a run on the city’s pension program for police officers and fire fighters, as it became increasingly clear that the fund was rapidly becoming insolvent.

Last week, the city’s elected leaders made their termination of the lump sum withdrawals that retired city police officers and fire fighters had been rushing to make to protect their retirement wealth before the pension fund went bankrupt permanently. Jim Schultze of the Dallas Observer describes the new action:

Whether or not the city can really get away with this new move—browbeating the police and fire pension fund into shutting down lump-sum withdrawals for Dallas cops and firemen—let’s be honest and name it for what it is. This is a default. It’s bankruptcy-lite.

Yesterday, the board of the Dallas Police and Fire Pension Fund blinked and did what the mayor was demanding. The pension board slammed the door shut on retirees who want to take all their money out of a special fund called DROP.

The mayor and the city manager want the board to agree not to open that door again until the pension board has taken a big chunk out of what DROP owes. And guess whose hide that chunk comes out of.

The city wants the pension fund to go back into the DROP fund and retroactively strip out all of the interest and cost of living increases that the pension fund originally promised to pay cops and firemen when they put their money into it in the first place however many years ago.

In finance circles, this kind of action is called a clawback, and it typically occurs only after an individual has been determined to have received excessive benefits or income through accounting errors or through fraud.

But for the city of Dallas, it wasn’t enough to avoid damaging the city’s credit rating. The Dallas Business Journal‘s Jon Prior reports:

Standard & Poor’s has downgraded Dallas’ credit rating over concerns about the struggling police and fire pension.

The city’s general obligation bonds were downgraded to “AA-“ from “AA.”

“The downgrade reflects our view that despite the city’s broad and diverse economy, which continues to grow, stable financial performance, and very strong management practices, expected continued deterioration in the funded status of the city’s police and fire pension system coupled with growing carrying costs for debt, pension, and other post-employment benefit obligations is significant and negatively affects Dallas’ creditworthiness,” S&P Global Ratings credit analyst Andy Hobbs said in a statement.

The police and fire pension system could go insolvent in the next 10 years because of a funding gap. The financial troubles, along with a multi-billion-dollar lawsuit between the city and emergency works, could put Dallas on a path to bankruptcy.

Credit rating agency Moody’s had previously acted to downgrade its assessment of the city’s creditworthiness twice in the last two months of 2016. The lowered credit ratings mean that the city will have to pay higher interest charges on any new money that it borrows, which will increase the cost of sustaining the city’s government to Dallas residents and businesses.

After the city’s credit downgrade, and with the leverage of the clawback, Dallas Police and Fire Pension officials acted late last week to once again permit lump sum withdrawals on more favorable terms to the city. Jon Prior reports again:

Officials of the troubled Dallas Police and Fire pension narrowly approved a plan Thursday to once again allow members to make lump-sum withdrawals that were halted last year if a judge approves the plan.

An estimated funding gap has put the system in danger of insolvency in the coming years, but officials crafted a plan to allow for limited distributions by members that hinges on the financial health of the fund each month. A judge will rule on Jan. 17 whether to approve the board’s plan.

For Dallas’ retired police officers and fire fighters, this last action means that whether they can have access to their retirement wealth will be entirely dependent upon how well the officials of the Dallas Police and Fire Pension fund manage the program. Given their disastrous track record to date, and without more serious reform, the ability of these Dallas city employees to protect their retirements from further clawbacks will likely be very limited.

Taxpayers Beware of Scam Cell Ad Copy


Tuesday January 17th, 2017   •   Posted by K. Lloyd Billingsley at 11:05am PST   •  

43684640 - science laboratory test tubesFor more than a decade, according to David Jensen of the California Stem Cell Report, the $3 billion California Institute for Regenerative Medicine “has given away money at a rate of $22,000 an hour, seven days a week, 24 hours a day.” Donald Kohn of UCLA got $52 million from CIRM, and his treatment of Evangelina Padilla-Vaccaro, age 6, is “just what Californians hoped for when they created the Oakland-based agency in 2004 via Proposition 71.”

CIRM therapies, Jensen continues, “would ease afflictions found in nearly 50 percent of California families,” and as then governor Arnold Schwarzenegger said, CIRM would create the “cures for tomorrow.” It hasn’t and the odds are against CIRM ever doing so.

As we noted, this medical-scientific bust has been angling for more money, and David Jensen is the lead pitchman. “California’s stem cell agency will run out of money in three years. Should voters OK spending more?,” runs the headline on Jensen’s January 17 Sacramento Bee piece, which finally acknowledges that he is a “retired Bee editor.” Jensen leads with the poster-child story, which as his highly promotional website confirms, was also on the cover of CIRM’s own publication. Jensen buries the reality that CIRM has handed out some 90 percent of its money “to institutions with links to past or present board members.” And despite stellar salaries, CIRM “has yet to come up with a therapy that reaches the general public despite rosy expectations raised by the ballot campaign.” No cures and therapies means no stream of royalties, as the 2004 campaign also promised.

Jensen invokes John Simpson of Consumer Watchdog of Santa Monica, letting slip that Simpson “was heavily involved in development of the agency’s intellectual property policy.” So no surprise that Simpson, supposedly a consumer advocate, wants CIRM to get more money “under the normal state budgetary process.” Jensen also invokes current CIRM boss C. Randal Mills, who compares CIRM to a flywheel. Once it gets turning, “it’s almost impossible to stop.” This guy understands that false promises, failure, corruption and waste are no bar to public funding in California.

With free spending high-tax evangelist Jerry Brown in office until 2018, look for more CIRM ad copy masquerading as journalism.

Gov. Brown Green-Lights More Government Greed


Monday January 16th, 2017   •   Posted by K. Lloyd Billingsley at 12:57pm PST   •  

ca_cash_flagAs Chriss Street of Breitbart News reports, California Governor Jerry Brown wants a 42 percent increase in the gasoline tax and seeks to hike Californians’ vehicle registration fees by 141 percent. These tax and fee increases are not to fix the state’s terrible roads, build more water storage, which the state desperately needs, or offer Californians some new service. The reason, as Street sees it, is “the insolvency risk from the exploding cost of California Public Employees’ Retirement System (CalPERS) public pensions.” Investment returns of 2.75 percent in 2015, and 0.61 percent in 2016, could have the state staring down the barrel of $964.4 billion in unfunded pension debt. For taxpayers, this should define government greed: extorting more money from the people in an attempt to fix problems of the government’s own making.

Governor Brown has already championed an income-tax rate of 13.3 percent, highest in the nation, and sales taxes approaching 10 percent in some cities. The state’s high corporate tax rate of nearly 9 percent is unfriendly to business, which also faces an onerous regulatory regime. In his first go-round, Brown authorized government employee unions and bulked up government with unelected bodies such as the California Coastal Commission. Brown has never seen a bureaucracy he doesn’t like and spends freely under any conditions.

He supports the state’s $64 billion “bullet-train” project, which some call a “Browndoggle.” He wants to drill two massive water diversion tunnels at cost of some $15 billion, doubtless much more. The state already has an attorney general, but Brown wants to hire former federal Attorney General Eric Holder to fight the new administration in Washington. And if Brown doesn’t like their policies, he says the state will “launch its own damn satellites.” That sort of rhetoric got Brown tagged “Governor Moonbeam.” Governor Greed would be more accurate.

Bullet Train Waste Still Railroading Taxpayers


Monday January 16th, 2017   •   Posted by K. Lloyd Billingsley at 10:02am PST   •  

trainblurBefore anybody else climbs aboard California’s “high-speed rail” project, they might give a listen to Ralph Vartabedian of the Los Angeles Times, who has been riding herd on this boondoggle from the start. The reporter has obtained a confidential Federal Railroad Administration risk analysis charging that the bullet train could cost taxpayers 50 percent more than estimated, as much as $3.6 billion more, just for the first 118 miles in the Central Valley, supposedly the easiest stretch of the project. This is the same Federal Railroad Administration that forked over grants of $3.5 billion for that very segment.

As we noted, Mr. Vartabedian also charted the bullet train’s tunnel vision. The route will require 36 miles of tunnels through the mountains north of Los Angeles, a tectonic boundary riddled with earthquake faults. This would be the most ambitious tunneling project in the nation’s history, and the probability of cost overruns, according to experts, is 80 to 90 percent. All along the route the railroad bosses need property, but as in Blazing Saddles, one thing stands in way: the rightful owners. Even if built according to plan, from Los Angeles to the Bay Area, the bullet train would be slower and more expensive than air travel.

As we noted, California’s high-speed rail project is best viewed as a bait-and-switch ploy to get state voters to finance local transit projects they otherwise would not support. For that alone it deserves the Golden Fleece Award, but despite cost overruns the rail authority, which as Mr. Vartabedian notes has “never built anything,” does not disappear. Like other useless state government bodies, it remains a comfy sinecure for ruling-class retreads like board member Lynn Schenk, a former congresswoman and chief of staff for governor Gray Davis. That’s why the waste keeps running off the rails.

The Next Grim Milestone for the National Debt Nears


Monday January 16th, 2017   •   Posted by Craig Eyermann at 6:39am PST   •  

40042419 - united states national debt and budget deficit financial crisis Last week, the U.S. Senate voted in favor of a new budget resolution, an action that was followed by the House of Representatives a day later, as it approved the same 10-year blueprint for the future budget of the federal government.

The measure is highly significant in two ways. First, it clears the legislative path toward the repeal and replacement of the controversial and failing Affordable Care Act, more popularly known as Obamacare, through the same means by which it became law.

Second, it would allow for the national debt to increase by an additional $9.7 trillion over the next 10 fiscal years, through its Fiscal Year 2026, which ends September 30, 2026.

That very large figure is perhaps best understood in the context of how the national debt has grown during President Obama’s presidency. As of this date, the total public debt outstanding of the U.S. government is all-but-kissing the $20 trillion mark, having grown by over $9.3 trillion during the past eight years.

us_government_total_public_debt_outstanding_jan_20_2009_to_jan_12_2017

To have grown by that much during the eight years of President Obama’s tenure in office, the U.S. national debt has had to increase at an average rate of $1.16 trillion per year. The Congress’s new budget blueprint would slow that average growth rate to $0.97 trillion per year, which is about 16 percent slower than than the average speed at which it grew during the past eight years.

At present, it is likely that the national debt will surpass $20 trillion in February 2017. The only reason it has not done so already is because the U.S. Treasury Department put the brakes on its issuance of new debt back in December 2016, to keep it under that amount through the end of President Obama’s term in office, in anticipation of the reimposition of the national debt ceiling on March 16, 2017.

When the national debt ceiling goes back into effect on that date, the national debt is projected to be $20.1 trillion.

The next major event that will help determine how fast the national debt will grow will be Donald Trump’s release of his first budget proposal, which should come within several weeks after he is sworn into office as the next President of the United States on Friday, January 20, 2017.

California Bureaucrats Learn It’s Not Okay to Lie in Court


Wednesday January 11th, 2017   •   Posted by Craig Eyermann at 7:28pm PST   •  

50994353 - california law, legal system and justice concept with a 3d render of a gavel on a wooden desktop and the californian flag on background. This week, a three-judge panel of U.S. Ninth Circuit Court of Appeals laid down the law on whether government bureaucrats, in this case ones employed by Orange County, can have a free pass from having to comply with any sort of ethical standards of conduct while appearing in court as part of their official capacity as government employees. As R. Scott Moxley reports on the court’s decision in OCWeekly, it turns out that federal judges really do frown on anybody committing perjury or presenting false evidence in court, including government officials:

Using taxpayer funds, government officials in Orange County have spent the last 16 years arguing the most absurd legal proposition in the entire nation: How could social workers have known it was wrong to lie, falsify records and hide exculpatory evidence in 2000 so that a judge would forcibly take two young daughters from their mother for six-and-a-half years?

From the you-can’t-make-up-this-crap file, county officials are paying Lynberg & Watkins, a private Southern California law firm specializing in defending cops in excessive force lawsuits, untold sums to claim the social workers couldn’t have “clearly” known that dishonesty wasn’t acceptable in court and, as a back up, even if they did know, they should enjoy immunity for their misdeeds because they were government employees.

A panel at the U.S. District Court of Appeals for the Ninth Circuit this week ruled on Orange County’s appeal of federal judge Josephine L. Staton’s refusal last year to grant immunity to the bureaucrats in Preslie Hardwick v. County of Orange, a lawsuit seeking millions of dollars in damages. In short, judges Stephen S. Trott, John B. Owens and Michelle T. Friedland were not amused. They affirmed Staton’s decision.

Moxley goes on to present the verbal exchanges that took place between the attorneys hired by Orange County and the Ninth Circuit’s judges, which you have to see to believe really happened with state-licensed attorneys.

Following the Ninth Circuit panel’s decision that government bureaucrats, despite what they might believe, are not entitled to commit perjury without penalty, the civil case against the government of Orange County will continue forward, where the county is at risk of a multi-million dollar judgment against it for the so-far-unanswered misconduct of its employees.

Twenty-two years earlier, Orange County went bankrupt in large part because of the unethical conduct of its government officials. While its potential liability in the new case is far below the level that would sent it back into bankruptcy proceedings, it would be nice if the county’s officials would finally learn their lesson about the proper conduct of public employees so it can avoid imposing such unnecessary liabilities on Orange County residents for their abuses of power in the future.

Double Jeopardy Waste in Reactionary California


Tuesday January 10th, 2017   •   Posted by K. Lloyd Billingsley at 9:01am PST   •  

ericholderCalifornia imposes some of the highest income and sales taxes in the nation, and Governor Jerry Brown’s own budget team says the state could face a budget deficit of $4 billion by the summer of 2020. Even so, the governor maintains the statist view that there is always money for everything. The Golden State has an attorney general, Xavier Becerra, but is now hiring former U.S. Attorney General Eric Holder’s law firm, at $25,000 a month, to fight the policies of the incoming Trump administration.

As one legislator noted, the 1,592 attorneys and legal staff at California’s Attorney General’s Office are apparently not up to the task. Beyond the waste and redundancy, Holder seems a rather curious choice. As U.S. Attorney General, Holder was fond of harassing the press, seizing phone records of AP reporters. Holder also managed the “Fast and Furious” firearms sting, a failure by his own admission, and when he failed to turn over documents he became the first U.S. Attorney General to be held in contempt of Congress. Even so, the governor wants to hire him, and the dynamic is not new for California.

Unsatisfied with Richard Nixon’s HUD policies, the Golden State created the California Housing Finance Agency in 1973. When President George W. Bush declined to fund embryonic stem-cell research, California Democrats, led by real-estate tycoon Robert Klein, launched the initiative that created the $3 billion California Institute for Regenerative Medicine, which in more than a decade has failed to produce any of the promised cures and therapies.

Governor Jerry Brown, who wants to spend $15 billion on diversion tunnels, took the reactionary pose to a new level. “If Trump turns off the satellites,” the governor said, “California will launch its own damn satellites.” The governor didn’t say what the satellites would cost, but he still believes that in California there is always money for everything.

Change Taxpayers Can’t Believe In


Monday January 9th, 2017   •   Posted by K. Lloyd Billingsley at 9:38am PST   •  

 

55354362 - hands of muslim woman holding bars in jailAs the Associated Press reports, on Thursday, January 5, Shiloh Heavenly Quine, 57, “became the first U.S. inmate to receive state-funded sex-reassignment surgery.” The procedure cost some $100,000, so Californians might wonder what Shiloh Heavenly Quine did to receive such an expensive procedure on the taxpayers’ dime.

In February of 1980 in Los Angeles, Rodney Quine and an accomplice gunned down Shahid Ali Baig, a father of three, then stole Baig’s car and $80. According to Baig’s daughter Farida, her father pleaded for his life. Quine was twice married and divorced and fathered two daughters but claims to have sought female status since the age of nine. So apparently it was a he-said-she-said sort of case. When previously denied the female overhaul, Quine reportedly attempted suicide and failed. But the convict gained hope in 2015, when California became the first state to pony up taxpayers’ money for the sex-change operations of convicted violent criminals.

What role Obamacare may have played in the taxpayer-funded sex change remains unclear, though in California, Obamacare has already caused “widespread consumer misery,” according to health reporter Emily Bazar. According to an August, 2015 LifeSiteNews report, San Francisco federal judge Jon Tigar, an Obama appointee, “assigned himself to Quine’s case and appointed a team of San Francisco lawyers and the Transgender Law Center to represent him.” Tigar’s view was that denying a prisoner’s sex-change operation may constitute “deliberate indifference” to a serious medical need and, if so, would be unconstitutionally “cruel and unusual punishment.” In 2015 California agreed to pay, and on January 5, 2017 Shiloh Heavenly Quine duly got the state-funded “reassignment,” which transgender activists construe as a right.

Actually, nothing is a right that puts mandates and costs on other people, and Quine’s surgery wasn’t a right. It was an unnecessary elective procedure that taxpayers were forced to fund. If paroled, the svelte Shiloh Heavenly Quine could perhaps audition for a “Tootsie” role. Trouble is, Quine has no possibility of parole and will now be heading to a women’s prison, where life will be much easier. California taxpayers can be forgiven for believing that a quick session on Old Sparky would have been the best treatment for this convicted killer.

Fixing the U.S. Government’s Budget


Monday January 9th, 2017   •   Posted by Craig Eyermann at 6:30am PST   •  

56947542 - young woman sitting depressed at the table because of financial problems Over the past eight years, much of the U.S. federal government’s operations have become something of an unmitigated bureaucratic mess. Whether we’re talking about the Defense Department, the EPA, the DEA, the IRS, the VA, the Energy Department, Medicare, Medicaid, the Department of Health and Human Services or the Department of the Interior, to name just a few, we have all seen far too many recent examples of mismanagement-enabled wasteful spending.

That’s why it was interesting to read the steps that Washington, D.C., budget wonks Paul L. Posner and Steve Redburn would recommend to rein in such wasteful spending practices. From the pages of Government Executive, here’s the short list of their suggestions:

  • Budget for major national goals by reviewing the relevant portfolio of spending, tax expenditures, regulations and other policies.
  • Strengthen the congressional budget committees, making them leadership committees that take a bigger role in shaping budget priorities and directing the work of other panels.
  • Establish a multi-year budget framework and process with annual targets for budget savings and investment consistent with fiscal sustainability.
  • Budget for tax expenditures and mandatory programs by regularly reviewing them and including tax expenditures in revenue and spending totals.
  • Revisit the use of budget concepts using a bipartisan process established by the president and Congress.

These are decent ideas, which were developed by the National Budgeting Roundtable. However, considering just how badly managed so many U.S. government departments have become with respect to their fiscal stewardship of U.S. taxpayer funds, it may be more beneficial to fold these suggestions into a much more comprehensive approach that would go considerably deeper to achieve positive results: Zero Based Budgeting.

Accounting firm Deloitte explains what Zero Based Budgeting (ZBB) means:

ZBB is a budgeting process that allocates funding based on program efficiency and necessity rather than budget history. As opposed to traditional budgeting, no item is automatically included in the next budget. In ZBB, budgeters review every program and expenditure at the beginning of each budget cycle and must justify each line item in order to receive funding. Budgeters can apply ZBB to any type of cost: capital expenditures; operating expenses; sales, general, and administrative costs; marketing costs; variable distribution; or cost of goods sold. When successful, ZBB produces radical savings and liberates organizations from entrenched departments and methodologies. When unsuccessful, the costs to an organization can be considerable.

Deloitte also provides the following infographic describing the key concepts behind it (click for a larger version).

deloitte_zero_based_budgeting

Perhaps the most surprising thing about ZBB is that it was originally employed to right the federal government’s fiscal house back in the 1970s, long before it was rediscovered by private sector firms bleeding cash in the years following the 2008 Financial Crisis and used to turn their financial fortunes around. Deloitte recognizes the potential for the federal government’s current situation in needing to get its spending under some semblance of control.

For organizations looking to grow by releasing capital through improved cost management, ZBB offers appealing possibilities for reducing costs while bringing additional value in the form of operational efficiency. In a best case scenario, ZBB may reduce SG&A costs by 10 – 25% within six months. The potential impact can be especially pronounced in the public sector, where ZBB could theoretically encourage Congress to only pay for necessary and efficient programs as opposed to sanctioning automatic increases in government spending.

This could be especially insightful when applied to programs and agencies that claim the biggest portions of government funding. For instance, while defense spending for 2016 was originally set at $523 billion, Congressional support for additional spending increases will bring total defense funding for that year to $619 billion. This $96 billion increase will occur on top of the previous budget, without adjustment for any previous fluctuation in needs or priorities. If government agencies were to actively seek an accurate base budget before spending increases were applied, additional funding could be allocated more effectively and efficiently.

Additionally, by forcing agencies and lawmakers to actively prioritize each program, ZBB could increase organizational efficiency by encouraging stakeholders to work together to analyze operations. In turn, this forces cost centers to identify their mission and priorities, which helps align resource allocations with strategic goals. Furthermore, by creating a budget and baseline from zero, government agencies would benefit from perceived increases in transparency and accountability both internally within their organization and externally with the public.

That’s the kind of outcome that both elected and appointed officials across the entire political spectrum in Washington, D.C., need to deliver. Zero Based Budgeting has delivered those kinds of results in the past – its time has come again for the U.S. federal government’s desperately needed comprehensive fiscal reform.

Government Postal Union Cuts Convenience for Consumers


Friday January 6th, 2017   •   Posted by K. Lloyd Billingsley at 3:19pm PST   •  

usps-truckCustomers of Staples Inc. have been enjoying the conveniences of in-store postal services but as Bloomberg reports, that will soon come to an end. The cancellation is a “coup for the Postal Service’s largest union,” the American Postal Workers Union, which fought Staples’ merger with Office Depot and urged customers to boycott the company. Had they not done so, said APWU president Mark Dimondstein, all Staples stores “would have had full-blown post offices, not staffed by postal employees but rather Staples employees, and the Post Office also would have used that model to spread to other major retailers.” Union boss Dimondstein thus confirms that what is good for government employee unions is bad for consumers and taxpayers. As they can easily confirm, a visit to a regular post office is like stepping into the eighteenth century, but this is hardly the only problem with the US Postal Service, a perennial money loser.

The USPS posted a net loss of approximately $5.6 billion for fiscal year 2016, worse that the $5.1 billion for fiscal year 2015. As we noted, during years of massive losses approaching $16 billion, USPS bosses got hefty raises. Postal bosses have sought to cut costs by ending Saturday delivery, but the letter carriers union had a problem with that. So did some politicians, who called Saturday delivery a vital service. It isn’t, and the use of “snail mail” continues to decline. Still, if one did have to mail something, it would be nice to do so in a Staples store. Government employee unions have now quashed that convenience, and the USPS remains an inefficient money losing monopoly.

The only way to fix this problem is to cancel the USPS monopoly on first-class mail deliver and open such service for competition. In 2017 and beyond, taxpayers will see if the new administration in Washington is up to the task.

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