Marc Joffe

Governor Brown’s proposal to fund CalPERS with borrowed money parallels a similar move by Puerto Rico in 2008. Borrowing to meet pension obligations can work under certain circumstances, but it is a risky policy. It backfired in Puerto Rico and can do so here.
Last month, the Commonwealth of Puerto Rico filed for bankruptcy in federal court. The island’s government is unable to service $70 billion in bonds and almost $50 billion in pension debt. The bankruptcy filing – the largest ever by a U.S. government unit – was just the latest chapter in a fiscal crisis decades in the making.
In 2008, Puerto Rico opted to plug a hole in its retirement system funding by issuing Pension Obligation Bonds (POBs). The Commonwealth borrowed $3 billion from bond investors to contribute to its Employees Retirement System (ERS), Puerto Rico’s analog to CalPERS.
Puerto Rico’s timing could not have been much worse.  Between early 2008 and early 2009, the Dow Jones Industrial Average declined by about 50%.
ERS disclosures do not allow us to see precisely how poorly the investments purchased with the POB money performed, but we do know that the total value of the system’s assets fell from $5.77 billion on June 30, 2008 to $5.07 billion on June 30, 2009 – a decline of about 15%. One saving grace for ERS is that a lot of its assets were held in cash or cash equivalents. That is usually a bad practice for a pension fund investing for the long term, but it worked in this case.
During the same fiscal year, CalPERS suffered a loss of 24%. Had the state borrowed $6 billion (the amount recently proposed by Brown) to invest in CalPERS in June 2008, almost $1.5 billion of that would have been wiped out. It would take several years of above-average returns to make up for such a large loss.
Given this history, a reasonable question to ask is whether a 2008-style market crash could happen again in the near future. Since 2009, an eight-year bull market has more than trebled stock valuations, increasing the risk of a major drop. In 2016, our own Ed Ring argued that stock prices were quite high by historical standards, and that it was reasonable to expect a 47% correction.
Since Ring’s piece appeared, the market has continued to rally, largely in response to Donald Trump’s election. The market seems to be expecting tax cuts and deregulatory policies that will stimulate growth. But with the Trump administration facing stiff resistance from Democrats, some Republicans and just about all of the mainstream media, it is increasingly possible that the anticipated policies will never materialize.
Whether it is a Trump administration meltdown, a collapse of the Silicon Valley bubble or a shock from overseas, history suggests that some event will trigger a downturn sooner rather than later. Even Jerry Brown seems worried. In his May 11 budget press conference, the governor told reporters, “We’ve got ongoing pressures from Washington and the economic recovery – it’s not going to last forever. In California, we don’t live in fixed world of straight-line revenues that keep rising and never go down.”
Brown’s comments refer to the state’s revenue volatility. California’s tax system is heavily dependent on revenue from capital gains taxes as well as personal income taxes on high earners, whose salaries rise and fall with the market. As a result, the state’s revenue swings widely with the economy. This is also the case with some expenditures, like public assistance, unemployment benefits and, especially, Medi-Cal.
So if we have a recession and bear market, the state will lose money on its CalPERS investment just as it starts running large deficits. And that could pose an additional problem. While Puerto Rico’s pension borrowing took the form of bonds, Brown is planning to borrow California’s $6 billion CalPERS payment from the Pooled Money Investment Account. PMIA holds short-term funds for the state, as well as cities, counties, and other local entities. On its face, borrowing from PMIA is a lot smarter than issuing POBs because the interest cost is much lower.
But in previous recessions, California’s General Fund has had to borrow from PMIA. During Fiscal Year 2009-2010, the General Fund owed PMIA a daily average of $9.6 billion. By lending money to CalPERS, PMIA may find itself unable to provide General Fund loans, just when they are needed the most.
Finally, while the rate on PMIA loans is very low right now, it is also variable. Although we have now had an extended period of short-term interest rates, many of us remember very different circumstances. In Fiscal Year 1981-82, PMIA’s short-term assets earned 12% interest as the Federal Reserve battled inflation. At the time, stock prices were also falling sharply, so borrowing money at variable rates to invest in CalPERS back then would have produced especially disastrous results.
Back in Puerto Rico, borrowing to fund pensions has been a failure. The government is now demanding that both bondholders and retired workers take a haircut. The Employee Retirement System reported a funded ratio of less than 2% last year. Current retirees will have to be paid from employer contributions, while new hires and current employees will be migrated to a defined-contribution plan.
Admittedly California has advantages over Puerto Rico, and some of the worst-case scenarios discussed here are improbable. But proper risk management requires us to consider the improbable. Rather than rushing into this transaction, lawmakers would do well to take the Legislative Analyst’s Office advice to slow down and carefully consider the implications.

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By Harold Pease, Ph. D


Please understand!  I am deeply offended when called either conservative or liberal.  These are traps for the ignorant who wish to reduce my years of serious contemplation to a word so that a part of my readers can praise me (“Well done! “ “You are one of us!”).  And the other part can dismiss me by a single word—even hate me.  This is war, every bit as much as it was for the Founding Fathers and I will not be dismissed.  There are Loyalist or Tories in our day just as there were in theirs and I stand to call them out, whether Democrats or Republicans. 


My views are the Founders collective view.  I draw from the same fountain of natural law as they did and appeal to the same “father of lights to illuminate my understanding” (Ben Franklin’s words at the Constitutional Convention), as they did.  I am my own thinker.


I have been a college professor for many years and students sit in front of me just waiting to tag me with some label that did not then exist in the same way and dismiss me or marginalize me so that they do not have to think.  As long as they are not successful they are teachable and have to deal with the inconsistencies of both ideologies—liberal and conservative.  I have friends in both camps and sooner or latter they say to me, somewhat surprised, “I thought you were one of us.”


I, like George Washington, dislike political parties.  Today both major parties undermine the Constitution and collective ignorance, reinforced by numbers, is more dangerous than individual ignorance.  Neither uses the Constitution as first consideration in governing.


I publicly challenged the Republican Party for leading us into the Iraq Wars against Saddam Hussein because the evidence for doing so (9 11, weapons of mass destruction, preemption-–the concept that they would do something to us eventually) did not exist and had to be constantly changed to justify our presence.  I did not oppose the war in Afghanistan because the evidence was there for 9 11 but I do now because we have no clear definable win objectives and lack the will to unleash everything we have to win.  It is another Vietnam quagmire.
 
It was the George W. Bush administration that gave us the Patriot Act, which allowed the government to define terrorists as her own people and severely damaged the Bill of Rights.  Republicans looked the other way as the National Security Agency (NSA) gave itself authority to gather and store in Bluffdale, Utah every electronic message of her own people.  While the government looks within for the enemy, it fails to secure our borders, until now, from Middle Eastern intruders from countries with a known intent to harm us.  With respect to national health care, something they unanimously opposed, and which has no constitutional basis, they now look more like Democrats who at least were not hypocritical in their desire to take-over a third of the economy.  “Obamacare-light” is still Obamacare.


Democrats have taken spending to an unacceptable level and seem intent to risk collapsing the entire economy in doing so.  With each crisis they help create, their remedy is always more government as they hamstring businesses that create our jobs with numberless rules and regulations. 


Their model is not the Founders or the Constitution but socialist countries in Europe some of whom tax their people over 50% of their income and have far less freedom. A worshipful press has never properly explained Obama’s past connection with revolutionary Bill Ayer, Founder of the militant Whether Underground, which bombed government buildings in the seventies.  While China, Cuba, and even Canada are showing clear signs of backing off socialism we seemed “hell bent” to rush into it under either Hillary Clinton or Bernie Sanders.
  
Moreover, instead of investigating the Clinton Foundation or Clinton Classified Emails Scandals, that jeopardized national security of which there exists extensive documentation, far more than on Nixon’s Watergate, they push Russian influence in the Donald Trump election for which real documentation is non-existent.  Amazing!


So what do I embrace?  I usually drop a tear or two when the National Anthem is played.  I am touched by George Washington who loved his country enough to risk his life in a doubtful cause failing to win a single battle the first year against England, the most powerful nation on earth, and refused pay from the government for his services as a general or as president.  I love knowing that Founders and presidents acknowledge the hand of God in crisis and shamelessly went to him for help.  I love the stories of servicemen who put their lives on the line to save a buddy.  I have undying respect for those who served their country with the primary intent of saving freedom—even if they did not understand the motives of the politicians who sent them.  I love people who stand for traditional values of honesty, integrity and morality and did not justify President Clinton’s numerous White House affairs.


So what am I?  Only a typical American that wants to return to our base and thinks more people embrace this description than either party ideology.  So please just call me a patriotic American.  That is a title that I wear with honor.


 
Dr. Harold Pease is a syndicated columnist and an expert on the United States Constitution. He has dedicated his career to studying the


writings of the Founding Fathers and applying that knowledge to current events. He has taught history and political science from this perspective for over 30 years at Taft College. To read more of his weekly articles, please visit www.LibertyUnderFire.org.


 
 

 

 
 
 
Byron Caudle (59) Loyalton.  Assault.  24 months probation, 92 days jail, fine $235, 20 hours of community service, and no contact with victim.
 
LeAnn Polastrini (43) Loyalton.  Failure to appear on probation violation. Six days jail, and reinstated on probation.
 
Hunter Henson (27) Loyalton.  Petty theft by shoplift. Fine $270, converted to two days jail, and ordered to pay restitution of $4 to Leonard’s Market.
 
Teri Pederson (41) Calpine.  Dog at large, fine $150.
 
Christine Kruck (59) Truckee.  Felony driving with blood alcohol of .08 or above, with three prior convictions.  Sentencing is on June 9, meanwhile she remains in custody in lieu of $75,000 bail.
 
Patrick Hall (35) Sacramento.  After a contested preliminary hearing, Hall was ordered to stand trial on possession of ammunition by a convicted felon.  He is in custody in lieu of $50,000 bail.
 
Gary Sather (34) Portola.  Brandishing a knife. Two years probation, 4 days jail, and a fine of $650.
 
Mark Mansfield (62) Newcastle.  Violation of Sierra County building code.  Fine $455 and ordered to fix the property to come into compliance.
 
 
 
 
 
 
Richard Douglas (23) Napa, and Deborah Hunt (34) McKinnelyville.  After a contested    preliminary hearing, both were ordered to stand trial on charges of  conspiracy to commit robbery, residential burglary while occupied by another person, and attempted robbery.       According to testimony produced at the preliminary hearing, Hunt and Douglas traveled to Downieville to collect an alleged debt owed to Hunt.  At 10:30 at night, the two approached the front of a Downieville residence and without warning, Douglas attempted entry into the residence by breaking windows by the front door.  While Douglas was trying to enter, the homeowner armed himself with a rifle and confronted Douglas demanding he leave.  Douglas approached the homeowner and was shot in the arm.  Douglas fled and was picked up by Hunt and the two left Downieville in a vehicle. The pair was stopped just south of Downieville by the Sierra County Sheriff’s Department, and taken into custody.  They remain in custody in lieu of $100,000 bail.

Grass Valley, Calif.

High River flows caused by Sierra snowmelt has made swimming or recreating near the shoreline of the South Yuba River extremely hazardous.
Due to a record setting Sierra snowpack and unseasonal warm temperatures, the South Yuba River is running faster and colder than we have seen in many years. Areas that appear to be safe may have dangerous undertow currents. Wearing life jackets and closely supervising small children are strongly advised.
Drowning is the second leading cause of unintentional injury death for children ages 1 to 14 years and the fifth leading cause for people of all ages. (CDC.“Drowning risks in Natural Water Settings.” 6/13/2012)
For the latest information on river conditions, please check the Department of Water Resources website.
Subscribe to California State Parks News via e-mail at info@parks.ca.gov or via RSS feed.
California State Parks
Provides for the health, inspiration and education of the people of California by helping to preserve the state’s extraordinary biological diversity, protecting its most valued natural and cultural resources, and creating opportunities for high quality outdoor recreation. Learn more at www.parks.ca.gov.
California’s D 

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Friday Night Live Kids
 
Are you a health care provider? If so, adopting a smoke free workplace policy could benefit patrons in many ways.
 
First, patrons won’t be exposed to the secondhand smoke in the air or third hand smoke which could make them sick. Many studies have shown that smoking bans reduce exposure to secondhand smoke, a preventable cause of illness and death.
 
Second, they would not have to see or smell tobacco litter. Nobody likes to go somewhere and see a lot of cigarette butts or ashtrays around.
 
Third, it shows that health care provider wants to protect the patrons’ health. When patrons notice that a smoke free policy has been adopted, it shows their health care provider cares about keeping everybody healthy. 
 
Lastly, patrons and their family members may try to quit after the policy is implemented.
 
In conclusion, Loyalton Friday Night Live Kids asks you to consider the benefits of having a smoke free campus.
 

 


          WASHINGTON, May 25, 2017 — Summer is a time for family vacations, backyard barbeques and plenty of outdoor activities with food as the centerpiece. But before those steaks and burgers go on the grill, the U.S. Department of Agriculture’s (USDA) Food Safety and Inspection Service (FSIS) wants to remind consumers to keep their family and themselves safe from foodborne illness by using a food thermometer to ensure meat and poultry is cooked to the correct internal temperature.
 
“The best and only way to make sure bacteria have been killed and food is safe to eat is by cooking it to the correct internal temperature as measured by a food thermometer,” said FSIS Administrator Al Almanza. “It is a simple step that can stop your family and guests from getting foodborne illness.”
 
Recent research by USDA and the Food and Drug Administration (FDA) found that only 34 percent of the public use a food thermometer when cooking hamburgers. If you don’t verify your burger’s internal temperature, pathogens may still be present. When eaten, those hamburgers can make your guests and your family sick.
 
In fact, the U.S. Centers for Disease Control and Prevention estimates that 48 million people suffer from foodborne illness each year, resulting in roughly 128,000 hospitalizations and 3,000 deaths.
 
So how do you avoid becoming a part of those statistics? Follow USDA’s four easy steps to food safety this summer.
Clean: Make sure to always wash your hands and surfaces with soap and warm water for 20 seconds before cooking and after handling raw meat or poultry. If cooking outside or away from a kitchen, pack clean cloths and moist towelettes for cleaning surfaces and hands.
Separate: When taking food off of the grill, use clean utensils and platters. Don't put cooked food on the same platter that held raw meat or poultry.
Cook: Alwaysuse a food thermometer to check the internal temperature of meat and poultry. Place the food thermometer in the thickest part of the food.
 

• Hamburgers, sausages and other ground meats should reach 160°F.
• All poultry should reach a minimum temperature of 165°F.
• Whole cuts of pork, lamb, veal, and of beef should be cooked to 145°F as measured by a food thermometer placed in the thickest part of the meat, and allowed to rest for three minutes before eating. A "rest time" is the amount of time the product remains at the final temperature, after it has been removed from a grill, oven, or other heat source. During the three minutes after meat is removed from the heat source, its temperature remains constant or continues to rise, which destroys pathogens.
• Fish should be cooked to 145°F.
• Meat and poultry cooked on a grill often browns very fast on the outside, and by using a food thermometer you can be sure items have reached a safe minimum internal temperature needed to destroy any harmful bacteria that may be present.

 
Chill: Place leftovers in shallow containers and refrigerate or freeze immediately. Discard food that has been sitting out longer than two hours. 
 
Need more food safety information? Call the USDA Meat and Poultry Hotline at (1-888-674-6854) Monday through Friday, from 10 a.m. to 6 p.m. ET, or email or chat at AskKaren.gov.