The recipe begins with government folks writing pre-dated checks called pension benefits. It comes in many forms. It is like you writing a check from your checkbook, with a future date on it, hoping that you can get the money into the account before someone tries to cash it. Simple enough.

The pension bond is used to flush up the account, as needed, and however many times as is needed over and over and over again, until all the gift checks are covered. There is no release obtained by the government when they flush up the account to cover the gifts that they never could afford to pay in the first place.

Are the pension obligation bond peddlers the evil folks starting, or at least encouraging, the runaway gift giving? Are the gift givers doing nothing more than throwing money away to buy political loyalty? Are they a tag team of thieves? RICO RICO RICO. The gift giving by the government folks could not continue, and expand, without the pension obligation bond peddlers enabling, and leveraging, the gift giving ability of the present set of gift givers. Wall Street casino gamers must be laughing all the way to the bank because the borrowed money is often tossed into the casino. The legal advisor folks seem to think that the more money a pension losses the better because they say that just means more borrowing. The cycle of wacko-ness just gets worse over time. It is a gambling addict phenomenon.

Well, in San Diego:

October 11, 2004

or google “Roberts Murphy pension san diego”

the headline reads:

Murphy, Roberts clash on financial leadership
By Philip J. LaVelle
UNION-TRIBUNE STAFF WRITER
October 11, 2004

Ron Roberts has used San Diego's troubled pension system as a blunt instrument, relentlessly pummeling Mayor Dick Murphy in his bid to oust him from office in the Nov. 2 election.

The article notes the 50 percent boost in pension benefits in 2002.

The simple explanation is here:

Michael Conger, a lawyer who has sued the city and the county in pension cases, sees more similarities than differences.

"The city and county pension systems are peas in a pod," Conger said. "They are both dangerously underfunded because both (county and city officials) granted massive and unaffordable pension hikes to their members."

Then here is an argument that I have not heard before:

The mayor [Murphy] also argued that the county pension deficit is really $2.2 billion, not the reported $1.4 billion, because it should include the roughly $800 million in outstanding pension-bond debt.

[He continues]

"It wasn't a bad decision to do that," Murphy said of the county's bond sales. "It was probably a good decision. What I'm saying is, if you borrow $10,000 on a second trust deed to pay off your credit card, that's a good decision, but you still have $10,000 worth of debt."

Then a rebuttal that gift giving is OK because we can afford it:

Roberts, in an interview at his campaign headquarters last week, was asked several times whether the 2002 vote and subsequent borrowing was bad public policy that pushed the burden to current and future taxpayers.

He did not concede the point and insisted that the county has acted responsibly on its pension system, which has strong credit ratings.

"There isn't any problem at the county," Roberts said. "The county wouldn't even be mentioned if not for the fact the city has a financial crisis going."

Summation:

Both governments were not alone among California municipalities in boosting benefits for workers represented by powerful public-employee labor unions.

then more summation:

Meanwhile, the back-and-forth between Roberts and Murphy has spread like poison beyond the bounds of the mayor's race.

Supervisor Pam Slater-Price recently yanked her endorsement from Murphy and sided with Roberts, citing Murphy's remarks about the county pension system, and county Treasurer Dan McAllister has hinted he may follow suit.

This is simple brawn over reason. Political loyalty in support of gift giving cannot be substituted for good investment reasoning. There should be one simple question asked of the parties; “Did anyone ever ask to obtain a release from further liability at the time of issuing the bonds?”

In reality the trustee requirement to invest prudently and government's duty to assure that pension plans are designed to be sound should have been enough. Just imagine if the trustee was the unions themselves. The union members would only have their own union leaders to scream at for running a corrupt system that was unsustainable. Once government starts acting as trustee and guarantor and gift giver, all at the same time, then all hell breaks lose. The only way out, ultimately, is for the trustee of government employee pensions to be treated with the same level of respect as some fly-by-night pyramid schemer in some shady office in some obscure office building downtown. Throw the book at them and tell the pension depositors to select a better trustee next time.

Instead, we reward our State Treasurer’s for their gift giving prowess, and shower them with all the political donations that one can muster. I can only hope that the San Diego fight gets down right unruly.

The Alameda Times is questioning Schwarzenegger’s borrowing frenzy too:

CALIFORNIA'S constitution is long, convoluted and filled with too much minutiae. But one section that deserves to be there, and is pretty clear, is the part that prohibits state government from borrowing money without a vote of the people.

Article 16, Section 1 says that the state shall not create any public debt that exceeds $300,000 unless the money is for a "single object or work" and is approved by a majority of the voters in a primary or general election.

The idea is that lawmakers and governors who come and go shouldn't obligate future generations to repay debts run up in the moment. The phrase about "single object or work" means public debt should be for lasting capital improvements -- roads, schools, dams -- not for the normal, everyday costs of government, which should be financed from current accounts.

Gov. Arnold Schwarzenegger, facing a huge budget gap when he took office a year ago, asked the voters in March to make an exception. He proposed a $15 billion bond, not for a single object or work, but to repay past operating deficits and ease the state back toward a balanced budget. At rallies across the state, he used an oversized credit card as a prop, cutting it in half to illustrate that this would be a one-time-only event. The borrowing, he said, would cease if voters approved his plan.

Daniel Weintraub seems to be a writer that I should read more often.

Maybe Daniel should look into the scan regarding making the "fair market valuation" determinations as to the real collateral value of the crap held by pension. A common stockbroker knows that the stock held as collateral for a margin account is worth only half its last traded price. Yes, we can borrow one billion dollars then buy one billioon dollars of stock and then have collateral that is worth only one-half billion dollars. The Wall Street folks can play this game until the local punks figure out the game plan. Its just that the folks who have to pay the bonds are still in grade school or have not even been born yet.

UPDATE 12/12/2004:
A recent google search, "HOW+IS+GIFT+GIVING+USED+AS+A+SYSTEM+OF+DEBT"
HOW+IS+GIFT+GIVING+USED+AS+A+SYSTEM+OF+DEBT

In the government system, one group of politicians pledge to give public money away, in the future, but it does not have to be noted (or even measured) in the current budget. When the bill comes due the old politicians are gone, but the folks holding the check in hand, most likely called something like pension credits and whatnot, demand the financial benefit of the gift (as in unlawful gift because it was not noted in the constitutional required appropriations process). The recipients always seem to have ascribed some measurable value to the gift at the time of gifting while the politician ignores any mention of the future payoff at the time of the gift in their budgets.

In West Virginia the court was recently asked to decide that a pension gift, promise, earnings whatever, graft, that was payable in the future was nothing more than a debt that was already owed and thus the bonding of that debt, under their constitution, did not need voter approval because it was a preexisting debt.

It is a cute trick. Any common pension happy politician could give away billions upon billions, causing a surge in gifts, that if viewed as debt, could then justify billions and billions of bonds without getting voter approval. It is the accounting and accountability version of total and complete anarchy. It was used in Oregon to raise money to do things like have the Oregon State Treasurer borrow 2 billion dollars then give it to the accounts of the higher ed PERS beneficiaries who then hand it back to the State Treasurer to invest in Texas Pacific to in turn invest in PGE (Portland General Electric).