Yuba County Supervisors remain unable to pay the debt owed to CalPERS (government employee pension fund). They owe nearly $145 million to fund the promises made to the unions and their members.
There are a number of reasons. For a start look at the amazingly high salaries/benefits compared with private sector pay. (See TransparentCalifornia.com for a salary and pension schedule).
As an analogy to the county debt, monthly credit card bills have payment options; pay the statement balance, a minimum amount, or something in between. Interest is charged on the amount remaining unpaid. That’s the same with CalPERS. Yuba County has never paid what they owed so they pay a lesser amount plus interest.
In Yuba County, the 5 supervisors are also 5 of the 7 directors of the Yuba Water Agency (YWA). YWA is flush with cash. So, the supervisors voted to request a loan from YWA – like $9 million for the CalPERS payment. Then as YWA directors they again vote to loan themselves the $9 million. With no checks and balances, at this rate they could run the county hundreds of millions in debt and keep borrowing.
Though deep in debt the supervisors instead tout how the interest rate from YWA was less than CalPERS. That’s like a couple with credit cards maxed. The husband shows up with a new shotgun and two fishing rods at 30% off. He tells the wife he saved 30% - no mention of the unpaid debt.
The supervisors are considered leaders but perform like mid-level managers. They are unable to chart a course of solvency. Has anyone heard of parents being praised for leaving their debt to the kids? Supervisors leave office with a retirement and leave the county with hundreds of millions in unpaid bills.
CalPERS is a Ponzi Scheme. The strategy is named after criminal Charles Ponzi. Ponzi promised extremely high returns on client investments, then pocketed money, and did not invest the funds as promised. Instead, early investors were paid “interest” from later clients’ contributions. The scam eventually collapses as the number of deceived newbies falters.
Private citizens go to prison for running such rip-offs. Politicians employ the same tactics to get re-elected by using the funds to pay unions and employees at unsustainable rates. In this Ponzi hustle the taxpayers get burned. There is not enough money left to sustain cities and counties as infrastructure and services fail. Today’s new government employees are paying the pensions of past retirees. That’s wrong.
In the real world who would invest hard-earned money for a retirement with an incompetent government agency? CalPERS uses politically appointed board members and a Woke investment policy. Profitable holdings have been ditched for poorer quality investments.
Therefore, the fund consistently posts horrible returns. Poor earnings mean local jurisdictions like Yuba County must make up the losses from their operating budget. In 2022, the fund shrunk by $30 billion or a minus 7.5%.
Just as Charles Ponzi over-promised generous returns to investors, CalPERS has consistently promised but mismanaged its portfolio and underperformed. Every time, the citizens are stuck with the tab to guarantee incredible benefits for the remainder of retirees’ lives.
Many retirees collect more money in benefits than the total they received during their working years. Many employees have double and triple dipped and used salary spiking to hack the benefit system. Vernon official, Bruce Malkenhorst, collected $551,688 a year until he was caught and his pension reduced to $115,848. He was ordered to repay CalPERS $3.5 million. There are many Malkenhorsts in the system.
In 2014, Federico Buenrostro Jr., a former CEO of CalPERS, pleaded guilty to bribery and fraud charges. He confessed that he forged letters to allow money manager Alfred Villalobos earn millions in commissions for investing $3 billion of CalPERS money. The CEO in return received more than $250,000 and other perks. Buenrostro went to prison. Villalobos was facing 30-years but killed himself before his trial.
Former Chinese Communist Party finance analyst Ben Meng, who joined CalPERS in January 2019 as chief investment officer, suddenly stepped down in August 2020. The US Senate was preparing to investigate him for espionage. He also was personally holding shares of stock while running the investment fund.
In 2021, CalPERS discovered that a 25-year employee had accessed 10 dormant retiree accounts and fraudulently redirected approximately $685,000 to bank accounts in the employee’s control.
CalPERS has a legacy of mismanagement, corruption, politics and lousy returns. Yuba County seems content to bury future generations in debt to pay for its “Cadillac” salaries and benefits.
(Lou Binninger can be heard on No Hostages Radio podcast, live on KMYC 1410AM 10-1 Saturdays, read at Live with Lou on Facebook and at Nohostagesradio.com)
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