AP link here.

Local governments in California are borrowing money this year at a rate unmatched in the past decade to pay for growing deficits in their pension funds, according to an Associated Press analysis.

So far in 2004, local governments with pensions outside the giant California Public Employees Retirement System have issued nearly $1.7 billion in bonds just to pay for existing pension shortfalls. With three months left in 2004, that's 50 percent higher than any year in the last decade, according to data from the California Debt and Investment Advisory Commission.

The stock market's poor performance, shrinking tax revenues and the creeping expansion of employee benefits all contribute to the swelling deficits in public pensions. But whatever the cause, these debt numbers suggest California governments aren't putting enough away for their employees' retirement.

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"It's a ticking time bomb," said Orange County Treasurer John Moorlach, "and everybody keeps walking around like there's no problem."

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Recent pension benefit increases for some Sacramento County employees totaled 15 percent. In Orange County new enhancements beginning next year will provide many employees with increases of 50 percent or more in monthly retirement payments, raising the subsequent cost to taxpayers.

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What makes these fund bonds attractive to underfunded government pensions is their exempt status under constitutional debt limits. Courts have held that public employee pensions are exempt as "obligations imposed by law." There's potentially no limit to the amount of pension debt local governments can incur, other than the negative impact to a government's credit rating.

The debt exemption is frequently reinforced by a "validation" procedure, in which local governments seek a court ruling that the bonds are fully valid and legal even though voters didn't approve them.

That ability to avoid the electorate makes validation an attraction for Wall Street, which earns handsomely on the bond issues.

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The beat goes on. So, is it simply a matter of unlawful gifts, called pensions, with a delayed date for drawing the check? Or, is it an opportunity for Wall Street to demand that the local governments borrow and then place the money into the stock market?

The June 2003 issue of the Government Finance Review, published by the Government Finance Officers Association, contains a historical account of the Pension Obligation Bond experience of Pittsburgh, Pennsylvania, written by James B.Burnham titled "Risky Business? Evaluating the Use of Pension Obligation Bonds"

It would make for useful reading for the uninitiated. The bottom line is that the local and state governments borrow money to place at risk in the stock market. The actuaries feed the idiots the notion that the rosy assumptions are the same as actual forecasts of future return.

How does the SEC look upon such imbalances between promised checks to public employees and the overdrawn checkbook account maintained by the government? In the Rauscher case, File No. 3-10592, Release No. 44864 / September 27, 2001, the Underwriter failed to be sufficiently pessimistic about the local government’s financial condition, and to alert bond buyers of this pessimism.

Now, let’s take a real look at the risk, the risk of the use of the bond money in particular. If a local government borrows a billion and then buys a billion dollars of stock, on the assumed forecast of appreciation by the actuaries, assumed appreciation in excess of the cost to borrow, has the risk to the local government actually increased merely by virtue of the bond itself? Why of course it has. The SEC knows full well the risks of holding stocks as collateral, they are so fearful that they even set strict limits of stockbrokers lending their clients money to buy stocks. I think they value stocks at about half its last traded value. Yes -- half. The SEC is accommodating the process of peddling the Brooklyn Bridge to amenable local government dupes, and then holding them to the bargain by making them buy the very same bridge again, at the risk of reduced bond ratings. The process nets a bunch of bonds backed by the taxing authority of the local governments. The actuaries and the bond rating folks are an integral part of the scam, if not an instrumental party.

In Oregon, ORS 238.600(2), has been on the books since June 1999. It limits the public’s liability for loses in the PERS fund, regardless of whether it is because of unsound design or investment loses. It is so clear and obvious that the PERS UAL conspiracy that has demanded “employer contributions” up the ying yang and more than 6 billion dollars of unlawful Pension Obligation Bonds that it is a house about ready to fall upon someone’s head.

The Portland Public School District is refusing to reconsider the legality of its 500 million dollar pension obligation bond, in the context of contending with the effort to Repeal of the Multnomah County Income Tax; the ITax. Little do they seem to know, or care, that the Portland officials are supplying me with the essential component to a RICO action of a “continuing” conspiracy. It is all tied together with the Actuaries and Bond Rating companies, and a whole lot of lawyers. They talked up the dire straights of Oregon’s finances to obtain a higher interest rate on the bonds that were not even based on a lawful obligation in the first place, and for which no one seemed to obtain a release from further liability upon the transfer of billions of public money to the private accounts of public employees.

Do not forget to read my friend of the court (amicus) brief on the Consolidated PERS cases. I have not held back on revealing what I intend to do; unless some special investigator beats me to it. My cousin died on March 7 from lack of funding for the mentally ill. She is in a class that can obtain special attention in federal court. Notwithstanding all the crying for funding for the public schools and for the mentally ill, the heads of the PERS UAL Conspiracy are making my case for me that their theft will cause the deaths of folks like my cousin, with their full knowledge and acceptance. It is a willful and wanton abdication of their official duties, and done so with the conspiratorial assistance of the Oregon State Bar, the State Attorney General, the State Treasurer, etc. ORICO specifically states that it is not a defense to say that the Sate Treasurer went along with the unlawful acts.

My mom was a co-founder of the National Alliance for the Mentally Ill (NAMI), which was preceded by the Taskforce for the Mentally Ill, which included a certain popular former Governor among its informal members. If she can go it alone fighting the legislature at every turn, then I suppose I can do the same, even if I need to oppose the local chapter of NAMI on issues such as whether the Multnomah County income tax is the solution to the problem.

Are the public school funds commingled with that of Multnomah County and the City of Portland? Is corrupt activity in the Portland Public School financing (as it pertains to PERS) a big drain on funds available to Multnomah County to serve the mentally ill, and my cousin? Are there multiple occurrences of corrupt activity within the last five years and is it continuing? I think the plain answer is yes. Can I get compensation for the kids of my cousin? I don’t know. I would sure like to see at least one Justice on the Oregon Supreme Court rise to the challenge of halting the PERS UAL Conspiracy and spit out a lengthy and detailed dissent.

If anyone thinks Vicki Phillips was not screened for her knowledge and attitudes towards Pension Obligation Bonds ought to read this little thing from Burnham in Pennsylvania. Or this. Or this. The pension fix, as the folks in the UK are figuring out, is to end anything resembling a final average salary.