California corruption increases
Posted in the California Forum
“ Soon: too late to protest”
Since: Jan 09
#1 Jun 13, 2013
New California Taxes Pay for Pensions, Not Schools
Most Californians would be surprised to learn that 100 percent of education’s share of the tax increase proposed by Governor Jerry Brown will go to pensions instead of classrooms. But that would be no surprise to longtime observers of the California State Teachers’ Retirement System, which administers teacher pensions.
Here’s why: After retirement, teachers are unconditionally guaranteed lifetime pensions by their school districts. Everything works out fine if Calstrs, as the retirement system is known, earns the investment returns it forecasts and from which upfront contributions are derived.
But if they fall short, school districts must make up the difference. Because of compounding, the failure to earn forecasted earnings translates into huge deficiencies down the road.
Unfortunately,“down the road” is where school districts are now.
Ignoring Warren Buffett
That’s where the tax increase comes in. Under California law, schools get the first 40 cents of every dollar of state revenue. With the state forecasting new revenue of $7 billion from the tax increase, that means almost $3 billion a year for the schools to use for pensions, or two-thirds of the Calstrs $4.5 billion request. A good start to meeting pension costs, but none of the tax increase will benefit students.
How did the teachers’ retirement system get here?
In short, it failed to take Warren Buffett’s advice. In 1999, Buffett said that long-term investors, such as pension funds, should assume investment returns of roughly 6 percent a year, not far from the actual return earned since then. Had Calstrs used his figure for its projections of the fund’s growth, it would have required larger contributions from school districts, employees and the state, and Calstrs would be healthier now.
Increase Masks Problem
Calstrs is now so far behind its forecast that the stock market would have to be almost 2.5 times higher than it is today in order for the system to meet that forecast, and from that point would have to double every nine years to keep pace. As a result, 6 million schoolchildren will get no benefit from the proposed tax increase. Worse, unless accompanied by a systemic solution, the tax increase will simply mask the problem and enable it to grow.
The problem wasn’t caused by teachers, students, taxpayers or California (BSTICA) residents. It was caused by politicians who made -- and are still making -- promises without contributing sufficient amounts to meet those promises.
It would be nice if we could just collect the shortfall from those politicians. But that isn’t possible. Solving the problem requires sacrifices from all Californians, which means some combination of the steps taken by courageous leaders in states such as Rhode Island and Colorado to address the source of their pension problems. Those steps include higher taxes, lower benefits for newer and current teachers with respect to years not yet worked, higher employee contributions and lower cost-of-living adjustments for retirees.
No pension problem is in greater immediate need of attention than the one at Calstrs. Unless addressed, more and more tax dollars will go to pension costs instead of to the classroom. In fact, not only would the proposed tax increase provide just two-thirds of the Calstrs request but a recent study from Stanford University says the system actually needs to triple, not just to double, its current contributions. That means even less money will make it to the classroom.
If children are to succeed in this very competitive world, they must receive a world-class education. In California, that won’t be possible so long as politicians continue to steal from them by refusing to address the single most important issue affecting school funding. Money from tax increases should make it to the classroom, and for that to happen, politicians must address pensions.
“ Soon: too late to protest”
Since: Jan 09
#2 Jun 13, 2013
Read more opinion online from Bloomberg View.
California continues to rot because the people are that pathetic. The taxes, a horribly corrupt legal system, etc. have driven good people out, so it’s the site of a future, bloody civil war.
Californians were warned that Jerry Brown was a career criminal but they keep electing the same old cronies again and again and then wonder why nothing changes. They should have demanded his prosecution instead. So, now you all suffer. When you keep throwing away all the good ideas, there comes a point where there are no more good choices.
California’s teachers all knew the kids were victims of ‘dumbing-down’ but nobody warned the parents, went to the media, or started a movement to save the kids. Instead, they fight for larger pensions so they can sit on their dead rears for many decades, as a reward for their child abuse. Who’s there for the kids? Certainly not their parents.
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