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Why cities like Ceres face budget disaster

POSTED February 14, 2018 10:42 a.m.
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Ever watch two dogs compete for food from the same bowl? Despite the fact that both are dogs and share a commonality, things can get ugly. Both must eat and instinct demands a "it's better you starve than me" approach to life.

Reminds me of how the police and firefighters have growled during recent City Council meetings when it comes to the same pot of money.

Let's take a look at the city's budget bowl. In Ceres, 80 percent of that bowl feeds police and fire. That includes all costs - police and fire salaries, benefits, retirement, training, equipment and maintenance, vehicle costs, etc.

The remaining 20 percent goes to engineering, recreation, public works (streets and grounds), code enforcement, city planning and administration and the operations of the Community Center.

Why is Ceres is having a tough time budgetarily? Not because of mismanagement but because of foreign pressures - namely the escalating cost of public pensions. Cities and counties are going broke trying to keep up with public pension debt. Stanford University Professor of Public Policy Joe Nation termed it "the albatross around the necks of cities and counties." Doing nothing about it means some cities will go under - as in bankruptcy.

Add into that the growing cost of liability insurance.

CalPERS, the California Public Employee Retirement System, is in charge of government pensions in this state. CalPERS is now in a world of financial hurt.

Pensions are funded in three ways: Employee contributions, local government contributions and returns on investments on those contributions.

The problem is complicated with the primary causes as follows:

1). Poor investment strategy. CalPers projected it would return 7.5 percent on its investments last year, but the return was a paltry one percent during a record stock market.

2). To keep their power, union leaders have pressed for city councils and boards of supervisors to hand over improved pension benefits in lieu of most cities being unable to afford upping salaries. Beefing up pensions allows union strikes to be averted, taxes don't have to be raised, and the fiscal impact happens after city and union leaders are gone, and hopefully with time, future leaders and market forces can coalesce to properly fund the improved pension benefits. But so far that has not been the case.

3). Generous pension policy occurred when the stock market of the 1990s caused gobs of money to come into the system. The CalPERS board allowed it to where state workers could retire at 55 - when Sick Pack Joe does at 67 - often with more than half their salary guaranteed for life. CHP officers could retire at 50 with as much as 90 percent of their peak pay. So, early retirements mean paying for longer periods of time at a higher rate than before. Voila! Huge debt!

As a plan to pay for the generous pensions, CalPERS inaccurately predicted high investment returns. It mishandled investments in some cases, investing in politically connected areas. There were allegedly corrupt CalPERS board members like Alfred Villalobos who allegedly bribed other board members to steer investment business for his clients, mostly large financial firms that wanted a piece of the huge CalPERS portfolio. The stock markets took a dive, compounded by the housing mortgage crisis. Now CalPERS cannot pay what it promised. Taxpayers have been on the hook to help. Pensions have cost an added $20 billion since 2011. And it's only going to get worse.

Other things contributed to the mess along the way. For example, a 1999 pension deal generated pressure on cities to match the new benefits for their employees. And in 2001, legislators passed a measure allowing city workers covered by the CalPERS system to bargain for the same benefits that the state workers had just won. Expensive new benefits spread across the state like a grass fire.

To bring it all home, the bottom line is if the city's costs are skyrocketing because of the pension mess, and the city budget is 80 percent consumed by public safety, stands to reason that police and fire are going to take a huge hit.

* * * * *
Better late than never.

Through the magic of the internet, I just learned - a full year later - that former Courier editor Lee Roddy has passed away into glory. Lee was 95 and died Feb. 2, 2017 in a retirement home in Grass Valley.

I was fortunate enough to speak to Roddy by phone several times.

Born in an Illinois farmhouse on Aug. 22, 1921, Roddy moved with his parents to Oakdale in 1931. His first short stories were published when he was 14. After a year at Modesto Junior College, he moved to Hollywood to begin his writing career. Beginning as a page boy at NBC, he worked part time writing for advertising agencies and selling freelance radio dramas at NBC, CBS and ABC before earning a degree in radio broadcasting at Los Angeles City College in 1945.

In 1947, radio station KTRB of Modesto offered him a staff position writing ad copy. Roddy married his college sweetheart, started a family, and advanced to become KTRB's sales manager for the next eight years. While still writing stories part time, he became general manager at radio stations in Honolulu, Hollywood and Anaheim. In the 1960s, Roddy switched from broadcasting to become a journeyman newspaper reporter for the Ceres Courier, Turlock Journal and the Modesto Bee.

In 1977, he sold the first of 60-plus books, a biography of Robert E. Lee (still in print), along with 40 other titles. More sales followed rapidly, eventually allowing him to quit his "day job" and write 44 adventure novels for middle grade readers, 10 historical suspense novels for adults, and several nonfiction titles, including "How to Write a Story."

Roddy's historical novel, "The Life and Times of Grizzly Adams," became a prime-time TV series. His juvenile novel, "Secret of the Shark Pit" was a million copy seller and is still in print. Among his other credits are "The Lincoln Conspiracy," (also a movie); "In Search of Historic Jesus," and "Jesus," a nonfiction book now also a movie in a thousand languages through Campus Crusade for Christ.

And yes, he was doing what he loved up until his death - writing. He was working on an adult and a juvenile historical novel.

Well done, Lee.
* * * * *

Boy, the Dems continue pushing laws for people to NEVER face consequences for their failures. State Senator Bill Dodd, a Democrat who represents Napa, Solano, Yolo, Sacramento and Contra Costa counties, doesn't want people having their water turned off when they don't pay their bill. He may call it "consumer protection" but can one be considered a consumer if one doesn't pay for service?

Dodd feels "access to water is a human right" - an odd statement given how Democrats have continued to ram policies down the throats of cities that have jacked up water rates beyond what many can afford. As an example, remember how the state required cities to meter every house? That cost the city of Ceres $4.1 million, which, of course, was passed onto ratepayers. With the ever increasingly stricter measurements of pollutants, the regulations have knocked some wells out of service when they used to, by the old standards, be considered good. That costs bundles.

Dodd notes that statewide, the cost of water grew by over 66 percent between 2007 and 2015. (Again, thanks Democrats). For many impoverished households, the cost of water is more than five percent of household income, which is over three times the affordability threshold of 1.5 percent.

Like I said, it was the policies of Dodd's party that inflicted much of this damage on residents of California. Now they are concerned about high water rates resulting in unpaid bills?

Dodd's bill, SB 998, would require water providers to provide for deferred payments, alternate payment schedules, and an appeals process on water shutoffs. The measure would prohibit shutoffs for at least 60 days following a delinquency and require cities to give advanced written notice and initiate actual direct contact with the residents before service could be discontinued. So what happens if the delinquent resident refuses to answer the door or answer the phone? Do they get free water?

If service is disrupted, the bill requires that people are told how to restore service, and it waives reconnection fees and reduces interest rates for low income households. In other words, the cities must mollycoddle the resident who was derelict in paying the bill that everybody else is expected to pay - on time.

* * * * *
I remember when then state Assemblyman Sal Cannella, D-Ceres, voted for a bill that paid girls in a pilot program to not get pregnant. Now there's another doozy in Stockton. The city is partnering with The Economic Security Project to pay families $500 in an experiment to see how it affects self-esteem and identity.

Stockton Mayor Michael Tubbs told NPR: "I think it will make people work better and smarter and harder and also be able to do things like spend time with their families because we're not robots. We're not just designed just to work all day and run a rat race."

Oh, but it's okay for everybody else to work all day and run the rat race to fund welfare programs similar to this?

Did we fail to mention that the mayor is a 27-year-old Democrat with short life experience?

No offense but in the vernacular of Donald Trump, Stockton is a "sh--hole" city. One in four Stocktonians live under the poverty line. Forbes magazine lists Stockton as the eighth most dangerous city in the nation! Just a question for Mayor Wet-Behind-the-Ears: How do you expect the 45 percent of Stockton households that don't speak a word of English to support themselves with jobs in an English-based economy? Is this a wringing admission by Democrats that illegal immigrants have flooded California cities and are a burden to taxpayers? That's the way I read it.

Adding "Sanctuary State" status will only continue to draw more illegals to a state already in a jobs deficit mode - especially here in the Valley.

Do you have any feedback about this column? Let Jeff know by emailing him at He will read it, promise.


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StephenDouglas: 1 month ago

1) "CalPers projected it would return 7.5 percent on its investments last year, but the return was a paltry one percent during a record stock market."

2) "The CalPERS board allowed it to where state workers could retire at 55 - when Sick Pack Joe does at 67"

3) "Other things contributed to the mess along the way."

1. I believe that year nearly every pension system, and many personal accounts, had very low returns. And there was a big difference in "returns" depending on whether one used a fiscal or a calendar year reporting.

2. CalPERS has long permitted retiring at 50, with a 1 percent formula instead of 2 percent at 60. Because one "can" retire at 55 does not mean one will. According to the LAO, average retirement age for miscellaneous employees is (was, as of 2011) 60. Slightly higher for teachers. According to Gallup, average retirement age for all U.S. workers has been 60 since about 2000. 59 before that. Census data reports the average retirement age in California today is 64. I assume the actual retirement age for state workers has increased also.

3. "Other things" like the "Greatest Recession"? Which devastated CalPERS and every other pension system in the country? Devastated private company and union pensions? Devastated personal IRAs and 401(k)s? Google "global pension crisis" 2008.

Some disasters are simply the result of not being able to predict the future.

Ron: 1 month ago

Since the public pension system is severely underfunded, city governments need to fund the retirements of former employees by taking money from government services as the increasing pension costs will likely continue to crowd out resources that otherwise would go to public assistance, recreation, libraries, health, public works, and in some cases public safety. Benefit costs are slowly crowding out the discretionary money available for states, districts, and schools to spend on other priorities.

“Defined retirement benefits” are creeping into budgets, especially when those benefits are underfunded. The unintended consequences are that it’s unfortunate that future generations, unable to vote today, will bear the costs of many enacted pension programs, entitlements and boondoggle projects, requiring the younger generations to pay higher taxes and work later into their lives to pay for these promises.

The international business world is intelligent enough to know that DEFINED BENEFITS, neither capped nor precisely quantifiable in advance are financial disasters to any business, thus all businesses focus on the known, i.e., defined CONTRIBUTIONS alone.

Stealing from the young who have no votes, but silently shoulder the costs and bear the burden of unfunded promises of these programs to enrich the old seems to describe the Governments expansion of entitlement benefits and other government services, along with the taxes young people will have to pay to support them, mostly to subsidize older Americans.

Even before those young folks can vote, our Golden State schools are on track to force substantial budgetary cutbacks on core education spending, as public schools around California are bracing for a crisis driven by skyrocketing worker pension costs that are expected to force districts to divert billions of dollars away from education and other government services.

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