California’s “newly elected Superintendent of Public Instruction, Tom Torlakson, declared a state of ‘financial emergency’ for California’s schools earlier this month and asked state residents to come to the aid of the state’s public education system. “ Mr. Torlakson  moaned about class sizes increasing as school budgets have been squeezed but his rant ignored the fact that California teachers are the second highest paid in the nation.  Were California’s average teacher salary move over time to the 15^th highest position (still in the top 1/3 nationwide), student / teacher ratios would improve over 20%.

I asked Mr. Torlakson about this at Governor Jerry Brown’s “Budget Briefing” at UCLA last month.   One of the Governor’s presentation slides showed that California Teachers are at the top of the pay scale at an AVERAGE salary of $68,000 BEFORE BENEFITS & RICH PENSIONS COSTS.   Watch below and see his response…

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Last week I calculated that CalPERS would increase its pension charges to cities, counties, and the state of California over 30% to regain massive investment losses over the last decade.  My initial estimate was drawn from a presentation by Kung-pei Hwang, CalPERS Senior Actuary, which I recorded mid November.  My report also detailed the gimmickry that CalPERS used to hide the 50% shortfall in their planned assets.  However, it looks like my estimate was way low because we now have new video of the CalPERS board stating in their own words that the costs to cities, counties and the state will increase a GINORMOUS 55% by 2013 and the increased rate will need to be in place for at least the next 19 years.

And, this will only provide a 50/50 chance of getting to where they need to be to fulfill pension obligations for municipal and state workers.   In aggregate for all municipalities and the state this could equal a $4 billion a year drag on the economy of cities and counties as each spends less for local government functions.  Many cities and counties are already struggling to meet the current pension costs.  The new rate threatens to put many governments into serious financial trouble.  For the City of Los Angeles alone this means an increase of $340 million each year in payments to CalPERS!

Listen at the 57 minute and 37 second mark of this video as a board member adds up the financial hit cities and counties in California are about to take……

In addition, CalPERS admits earlier in this video that they have not built into their forecast the fact that restrained government budgets will likely result in layoffs and/or early retirement which will further strain the pension system.  Less municipal & state employees means less payments made into CalPERS to refill its underfunded coffers.  Their financial model does not reflect this reality.

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CalPERS financial sleight of hand is reminiscent of Bernie Madoff’s lying to his investors through phony statements designed to mask losses and outright fraud.

Much has been written about The California Public Employees’ Retirement System (CalPERS) being underfunded by $500 billion due to massive investment losses over the last decade, but now we have video of a CalPERS Senior Pension Actuary, Kung-pei Hwang, describing how they intend to change basic assumptions in their financial model to (please allow me to mix my metaphors) Hide The Decline in their assets held for municipal, county, and state employee’s retirement.

Through this statistical gimmickry, CalPERS can push the loss into later years and appear solvent today.  Of course, at some point in the future it will need to raise funds from state and local governments to compensate for these losses.  But for now, they seem content to hide the disastrous condition of their fund.

As you can hear Mr. Hwang say in his presentation to the Huntington Park City Council last week, “that means we will defer most of the loss to future years.” “This means the city will realize another increase in future years. I hate to bring bad news, but those are the facts.”  Well, the fact is this bad news will hit budgets for all cities, counties and the state of California and not just Huntington Park.  By playing with its financial model in this way, CalPERS is treating all California taxpayers like Madoff investors by cooking its actuarial books to Hide The Decline in its assets.

It gets worse, much worse as noted below after the video………..

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