Over the past several months, much has been reported about the Occupy movement, including its identification as the 99% in contrast with the 1%. Local groups such as Occupy Petaluma and Occupy Santa Rosa have generally discontinued their physical occupations of public spaces, concentrating instead upon awareness campaigns about important issues, especially home foreclosures.
With our attention being drawn to the concentration of wealth held by one percent, The Economist current issue has a description of the very rich in America entitled “Who exactly are the 1%?” It provides excellent information about who the wealthy are and their percentage of total income earned in America.
From the Occupy movement we have learned a one percent measurement representing financial inequality. Meanwhile, another one percent measurement brought to my attention recently represents fiscal recklessness.
Tom Lynch, a Sonoma County Planning Commissioner who pays close attention to Sonoma County pension issues, recently provided me with information he had received from Gary Bei, administrator of the Sonoma County Employees’ Retirement Association (SCERA). Its financial summary for December 31, 2011 shows that the 7.75% rate-of-return projected for this pension fund was not met in 2011, with its return being only 1%. By also reviewing the financial summary issued for December 31, 2010 we learn that the 7.75% projected rate-of-return is not being met for most of the various periods measured in both 2011 and 2010.
This offers us further evidence that the gamble of taxpayer funds made by the Sonoma County Board of Supervisors when it unanimously decided to issue pension bonds at a 5.91 per cent interest rate hoping for earnings of about 2 per cent more per year isn’t paying-off. These County of Sonoma pension bonds and the SCERA use of projections for an annual average 7.75% rate-of-return (only recently lowered from 8%) have instead put the county hundreds of millions further in debt, yet SCERA got even further behind during 2011 in meeting its pension obligations.
Recent coverage in The Press Democrat about Healdsburg and Santa Rosa shows us that other governmental jurisdictions also have significant unfunded pension liabilities. However, the County of Sonoma is unique locally due to the significant scope of its unfunded pension liability even after it recklessly relied upon the issuance of pension bonds on several separate occasions.
As Joe Nation, former California Assemblymember and now a professor with the Stanford University Public Policy Program, has stated, “there is no easy way out.” Yet the way deeper in is clear. Pretend to be solving the underfunded pension problem by loading up on unsustainable debt coupled with use of unrealistic rate-of-return projections and creating a report with unattainable assumptions. Then earn only one percent!