It was 1976 when the city of Oakland realized it had a major problem on its hands: A pension created 25 years earlier to benefit police officers, firefighters and their widows was proving too costly to afford.
So the city closed the plan to new employees and later passed a parcel tax to pay for the pension. Yet today, that pension remains the source of one of Oakland's biggest headaches.
It's a generous plan that awards its retirees and widows - who now number 1,086 - raises to match up to two-thirds of the pay of the current-day workforce. But the city's costs ballooned because it never adequately contributed to the pension fund, relied on borrowing for years to give itself holidays from pension payments and watched investments go south. The result of the borrowing is that the pension, known as the Police and Fire Retirement System, has cost Oakland taxpayers hundreds of millions of dollars more than it should have. In 2010, City Auditor Courtney Ruby found Oakland spent $250 million more on the pension than it would have if the city had simply paid into the pension - and that was just for one of its bond deals.
Last month, the majority of the Oakland City Council, at the urging of Mayor Jean Quan's administration, voted to borrow money once again to cover the pension bill - $210 million in new pension bonds that will cost another $105 million in interest over the next 14 years. But the loan will allow the city to avoid paying for the pension from its general fund for four years. If the city hadn't borrowed the money, it would have been forced to take $38.5 million from its roughly $400 million general fund to pay for the pension this year. Such a move would have required deep cuts to city services, which already have taken a hit due to the slumping economy, state budget cuts and redevelopment shutdown....
Councilwoman Libby Schaaf, who voted against the bonds last month, criticized the idea of paying $105 million in interest to avoid a $38.5 million payment into the pension fund this year.
"Pensions are supposed to be paid for while the person is working," said Schaaf. "Obviously, we failed terrifically in doing that."
The bond sale relieves fiscal pressure now, but Schaaf said it creates pressure in the future. In the last three years of bond payments, starting in 2024, the city will have to pay $161 million in bond and interest payments on top of the $123 million it will owe for the pension itself.
"I'm terrified that the city of Oakland will someday need to declare bankruptcy," said Schaaf. "It creates a false sense of security that our finances are in order while our pension obligations mount and the debt balloon payment becomes due, starting in 2024."...
By all indications, the city never had a plan to pay for the Police and Fire Retirement System when it was started in 1951.
It had a $38 million hole from the beginning, said Bob Muszar, a retired Oakland police captain and president of the Retired Oakland Police Officers Association. Muszar has spent years researching the pension. He said that by the 1970s, the pension's shortfall had grown to over $200 million...
The City Council this year sued the board that manages the pension fund, alleging that retirees' benefits should have been cut when current officers got pay cuts. "All of it is outrageous," said De La Fuente, who voted against issuing the latest bonds...
Nita Balousek feels a sense of betrayal. The city's lawsuit and the city's seemingly tenuous grasp on its finances have her fearful that someday it might file for bankruptcy - and the pension might be lost forever.
"I feel on edge," she said. "I'm deferring making any financial decisions."
SFTimes, NYChronical(ly Wrong), whatever. Here's a link.
Investments "went south" they say. Could that be because it was invested with Wall Street thieves, con artists and frauds who haven't had to pay back a dime of what they stole?
Yeah, that could be - just like the problems those fuckers have caused so many pension plans all over the country. They basically raided them and walked away. They didn't walk away empty handed, of course.
But it's those awful, terrible, greedy, lazy UNIONS that are the problem, right Republicans?
Keep tea baggers where they belong
R3, you would have a point if it weren't for the fact that the big banks/Federal Reserve and US Treasury department aren't halves of the same coin, and that reckless spending, borrowing and "monetary policy" caused the problem.
Other than being 100% wrong (except about the lazy unions, using the government to pad their wallets) you're right!
This is a story that will be repeated, over and over, for the next few years.
Reckless borrowing and spending has killed this country.
The bankers did ruin most pension plans, but state worker's pensions are crazy. My grandfather retired in 1977. He died 10 yrs later, but my grandmother received his pension until she died last year. And she got cost of living raises almost every year. My grandfather didn't pay in a tenth of what was paid out to my grandparents. I don't care what kind of investment you have, nothing would equal what they got out of the NJ Teacher's pension fund
This is sort of like what happened to the auto companies. They gave spouses medical benefits - even after the worker retired. They are stuck paying for a spouses medical bills. Even when the person goes on Medicaid, the auto company has to pay the percentage that isn't covered by Medicaid. Over $3500 of every U.S car sold goes to legacy costs (retirees and their spouses)
Imagine what it's like in the near future. The US taxpayer is on the hook for all private pensions-
...It is the confidence of an all-powerful government at their back with the US Pension Benefit Guarantee Corporation, which is the backstop for private sector plans, providing cover. The problem is, as UBS explains, the PBGC has a huge deficit and is cashflow negative. This leads us to the uncomfortable expectation of further USD government support (bailout) or a more direct monetization by the Fed. PBGC could be impacted severely if a few large firms terminate their pensions. In this case, UBS expects PBGC to sell equities and buy long duration fixed income.
There are a LOT of foreign car companies operating in the US (Tennessee, Alabama, etc.). Does anyone know if the foreign car companies operating in the US have to pay the $300 per car stated in r6?
R8, I meant U.S owned auto company
r6, why would foreign auto companies in the US be exempt from US laws?
Why does it matter whether US or foreign owned- they are backed by the US taxpayer, and so we are on the hook.
It matters, r11, because if we had nationalized health care, we wouldn't have to pay that extra $3500 per car for retiree health care costs. Those costs would be funded by the government health care plan. If the foreign car companies aren't paying that like the domestic ones are, then they NEED to be paying it. If you're going to do business in a country, then you need to abide by the laws of that country.
R8, largely they do not - those are older UAW or previous 'white-collar' nonunion pension plans, particularly at GM (now modified for new employees and with a buyout offer underway for older vested employees.) The imports built in the US are generally built at non-union plants.
R12, your tragic inability to understand basic economics is sad.
The reason health care is so expensive in the US is because the government controls it. Look at how cosmetic surgery has gotten cheaper and cheaper over the last 20 years- its because it isn't nearly as regulated by the government. Look at electronics. Look at any area where the government DOESN'T control it, and it's cheaper.
Until the government gets out of the way, it's just going to drive people (that can afford it) to Costa Rica or Singapore for surgery, where they can get it (free of government regulation) at 1/5th the cost. The rest of you will have to wait months, get substandard care, and pay exorbitant taxes for the privilege.
Absolute bullshit R14. Every other developed country has government provided, or government mandated private universal healthcare, at a fraction of the cost of what it is in the for-profit addled USofA. Get your pounty head out of the teapot, moron.
The 3500. per car figure legacy cost represents more than just healthcare - it includes legacy pension plan costs. GM's pension plan funding is billions in the red without even considering medical care. Nationalized healthcare would reduce the cost somewhat, but wouldn't eliminate the full cost difference because of the huge pension plan underfunding.
The legacy plans were negotiated by the Big Three manufacturers and the UAW, not driven by the requirements of US law. New employees are not as lavishly covered because they're hired in under UAW Tier 2, negotiated in 2007. (They also have significantly lower current wages.)
Even though the import manufacturers aren't unionized, they do contribute to healthcare plans for their current employees. A truly nationalized health insurance plan would contribute to adding more manufacturing jobs in the US - the lack of same has caused more than one auto plant to be built in Canada rather than the US recently.
Oh, and R14, isn't it just as likely that cosmetic surgery has gotten cheaper because insurance doesn't cover it, so people have to pay for it out of pocket?
"cosmetic surgery has gotten cheaper because insurance doesn't cover it, so people have to pay for it out of pocket?"
You prove my point. Empolyer Insurance is the result of tax laws that allow employers to offer insurance as a benefit without tax. A $30k/yr job with a $10k/yr insurance plan only pays taxes on the $30k.
If all med costs were out of pocket, and no tax benefit, then the costs would be far lower. Duh.
r14, is right. I shopped at sixteen hospitals when I was on vacation in Thailand and Cambodia before I found the right one to yank out my appendix. The marketplace fixes everything!
Man the man is always trying to screw the little guy
Petty thieves are hanged, major ones go free.
Yes, R20, but only if they have the government at their back, or side.
R21, that's why the Wall Street Banksters are making millions each year.
[quote][R12], your tragic inability to understand basic economics is sad.
ROFL... Oh, the irony, coming from this idiot.
[quote]The reason health care is so expensive in the US is because the government controls it.
Uh-huh. Gee, that must be why health care costs are so much higher everywhere else in the industrialized world, where they have almost complete government control of the health care system.
And that must be why Medicare costs are so much higher here in the U.S.
Don't worry boys. We own the world's reserve greenbacks, and we can PRINT them. No problemo .. well, you should live fast now and plan to die fairly young however.
They should RAISE the benefits to policemen and firemen, these men are heroes.
They should END all payments to welfare kings/queens, these people are parasites.