Golden State Asks Public Pension Plan for Help

According to "California officials hope for easing of credit crunch" (October 4, 2008), Los Angeles Times reporters Marc Lifsher and Evan Halper paint a gloomy financial picture for this giant state. They explain that Governor Arnold Schwarzenegger may have no choice but to ask for help from Washington if short-term credit markets do not soon improve. An inability to issue Revenue Anticipation Notes with a face value of $7 billion will make it difficult to "get cash to pay for day-to-day operations, including paying workers, funding schools and feeding prisoners, between the end of October and the spring." Click to read the October 2, 2008 letter from the former action hero to The Honorable Henry M. Paulson, Jr.

Vox populi Jon Ortiz (aka Sacramento Bee reporter) and creator of The State Worker blog writes that State Treasurer Bill Lockyer may set his sights on the public workers' pension money pot, CalPERS. Author of an October 3, 2008 letter to The Honorable Bill Lockyer, State Senator Dean Florez writes that "the state should look to one of the world's largest investors, the California Public Employee Retirement System as a reasonable purchaser of short-term California state government debt."

In "Could CalPERS help with California's cash crunch? Maybe" (October 3, 2008), Ortiz posts a response from CalPERS spokeswoman Pat Macht who comments on process. "If we are approached, our investment staff would do their normal due diligence and make an objective evaluation of its merits, including returns as well as how it would fit within our asset allocation ranges and targets which guide our investment selections."

Editor's Questions: Will other cash-strapped states ask public and municipal pension plans to buy state debt? If so, how might this impact the funding status of those employee benefit schemes?

Comments

[denny:]

How can broke organizations borrow money without first fixing their problems ? California does not have a money printing press like Washington, D.C.

2008 Oct 05 08:33 AM

[messy:]

If California need money from the federal government,,,,i think that at least half of all the states will need more money also. For example,,, all our state colleges and universities, all our hospitals, all our police departments and sheriff departments, and of course all our labor and work employment centers that can't find any jobs at our non-exsisting factories. GO FIGURES IT OUT STUDENTS.

2008 Oct 05 08:38 AM

[fg144331:]

I really do hope that CalPERS is not asked for money and if so, they say NO! NO! NO! It could/would be an open ended BLACK HOLE! Maybe
the Teachers retirement fund could be tapped also? Hope NOT.

2008 Oct 05 09:04 AM

[sorgmot:]

All the United States of America and particularly the Golden Bear State are in the beginning stages of a liquidity implosion quake with after shocks that will last 10 to 20 years.

In a liquidity crisis asset values in US $ terms fall and debt and other liabilities such as service contracts do not. Thus, all debtors have a choice of selling assets as they collapse in price or defaulting on debt or arranging for creditors to reduce demands.

Why do Californians think think that money from ofter states should bail them out? Other states are in the same position California is in. Get California to bail them out.

Maybe California would like to sell parts of itself to other states or accept the same per state citizen limits on spending that other states have?

Good Luck

2008 Oct 05 09:04 AM

[granger:]

this is a very loud warning sign, if municipalities and states are the next shoe to drop, we are in deep trouble, I am still opting for cash over equites anddebt at this point, just my opinion

2008 Oct 05 11:31 AM

[Lou Thomas:]

Too bad Congress just gave $700 billion of taxpayer money to Wall Street to buy toxic securitized debt. California's shortfall could be helped substantially by a tiny fraction of that money. Other states and cities across the nation are also in trouble, and need their share of those funds.

If the U.S. government is broke, then where will the funding for this depression's green industry / infrastructure "WPA" come from? Government spending got us out of the last depression, but the parasites were more effective this time and have drained the host nation of its vital force.

2008 Oct 05 01:34 PM

[DanTanner:]

" Kalifornia" is broke and the dumb Governor is begging for handouts. They raised so much taxes and have an aggressive Tax system but still they cannot make it.

2008 Oct 05 04:50 PM

[Pessimistic...:]

Ca already borrowed/aquisitioned $$ from PERS. The effort to recoup was of epic proportion, herculean by all involved. In fact, I am not sure if that has been completely restored. . A new bill was passed that CA Govt could not get their hands on PERS $$.
I am in PERS.A proud member for over 28 years. Maybe a bit bias but that is my...along with hundreds of thousands of other's pension. I understand the complexity of the financial status of CA, so much so that I realize it is way over my head. What I understand better is the state's ability to sieze and use for their own desire funds from PERS in the past.
If and when the bail out of CA is investigated and then gone over again with the micro micro scopes and if the financial wizards of PERS feel they can do this with a gain in sight, more power to us. The GOV has threatened to get into our pensions and PERS $$ without success.
Our team was able to thwart the efforts however prehistoric and politically motivated they were. Hopefully, PERS will keep that in their memory and on the front burner when deciding on whether to help.

2008 Oct 05 04:55 PM

[Maven12:]

PERS isn't likely to be a good source. They don't buy tax exempt debt because they don't pay taxes and California doesn't normally sell its debt to entities which do not pay income taxes on the interest.

If PERS is the only place where CA can borrow at any price, then we do, indeed, have a liquidity crisis.

2008 Oct 05 07:12 PM

[Sean in CA:]

No thanks! PERS is performing well despite the current recession, and hopefully the investment staff will not go with these insane "Revenue Anticipation Notes".

2008 Oct 05 07:39 PM

[Obama is Bu...:]

Hey -- I spent WAY more than I could afford. Someone else should pay for my mistakes, not me.

Where is my bailout?

2008 Oct 06 01:05 PM