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June 2012 Edition

The Case for Statewide Reform of County Pension Funds

The Time to Act is NOW!

V. Converging Trends Will Increase Pressure for County Pension Fund Reform

A number of trends are converging I believe are likely to create real opportunity in Sacramento to drive reform into the state’s County Employee Retirement Law (CERL) within a year. That could open the door to even broader reform of County Pension Funds. Some of those trends are common to all public pension funds in California. But one particular trend is ONLY present in the County Pension Funds at this time.

IRS: The IRS began examinations of all 20 California CERL Pension Funds through its Voluntary Correction Program (VCP) around January 2011. Results are likely to begin to be released before the end of calendar year 2012. The IRS is expected to require significant changes in CERL and county ordinances. Significant violations may be exposed similar to what they found in the City of San Diego that could deeply offend citizens. Click here to read my previous archived reporting on the IRS-CERL County VCP process.

San Jose – San Diego Ballot Measures: Pension reform initiatives are on the June ballot. Polls suggest strong support. If they pass public interest in reform will greatly increase.

 

Major Pension Financial Reporting Reform: The Governmental Accounting Standards Board (GASB) intends to introduce new pension financial reporting standards in June 2012 that will hit state and local governments like a ton of bricks. Most will report much higher pension expense and debt. The new reports won’t be out before the November election but reformers can show voters what they will look like. Hundreds of billions of unreported pension expenses and much greater debt will stun the public.

November Tax Measure and Woefully Inadequate Legislative Pension Reform: State officials are asking voters to significantly increase taxes in November 2012. This makes voters far more receptive to what citizen reformers have to say. Too many government officials (not all) deeply violated their fundamental financial duty. Huge pension debt is the proof. The Legislature is likely to pass “pension reform” before the election that won’t come close to solving our real problems. The tax increase proposal will increasingly be seen as a “pension tax”. This is a supreme “teachable moment” for reform.

 
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