CA CAFR: $600 billion ‘pension investment’ fund nets just $1 billion

California’s 2011 Comprehensive Annual Financial Report (CAFR) shows a tax surplus of $600 billion dollars in cash and investments. The online public report on page 83 lists $460 billion of investments claimed to help fund state pensions. Pages 234-235 show these investments had $10 billion income, and cost $3 billion in expense (Wall Street investors). Page 107 shows $6 billion interest cost for the state’s $164 billion debt.

Therefore state investment income minus debt interest cost equals ~$1 billion. This means the state retains $600 billion in taxpayer assets for $1 billion in income.

If California paid its debt and returned these assets, each of California’s 12 million households would receive $35,000, and pay a $83 tax to equal the $1 billion income of the state’s previous $600 billion fund. Or if we had universal health care, Californians would annually save between $10 and $30 billion.

With increasing state debt, California’s CAFRs net investment income for the last four years has a nominal average of negative 0.2%, if we assume the various fund/cash accounts is 26% of investments as is the total for the ~80 different accounts for 2011. Net nominal returns for the last ten years averaged just 1%.

This data of “investment” income refute any rational claim that retaining hundreds of billions of taxpayer assets is necessary or even helpful for funding state pensions.

Even-more astounding is $8 trillion in total surplus taxes from sampled data of California’s various ~14,000 government entities’ CAFRs (for example, page 63 of L.A. County’s 2011 CAFR shows $66 billion in cash and investments).

$8 trillion returned to each household equals ~$650,000. Of course, these colossal investments should be considered by multiple and independent cost-benefit analyses to discover our options; we can’t simply all cash them in. Ellen Brown’s work for state-owned banks document other options.

The people of California don’t know about the existence of CAFR-revealed funds because both parties’ “leadership” and corporate media are silent.

It’s not the job of government to lord over public riches in silence.

It’s the Orwellian opposite of public service to be silent about riches, and claim the public must lose essential infrastructure because the public doesn’t have the money. Governor Brown saying a $16 billion budget deficit with “no option” than austerity is similar to claiming no money in a checking account to pay for our children’s schools, but having 35 times that amount in savings.

In fact, such intentional deception by officials with fiduciary responsibility for comprehensively accurate public financial information seems an “emperor has no clothes” obvious criminal fraud in the literal magnitude of trillions of dollars.

So what’s a solution? As I wrote:

These tragic-comic cover-ups of what the public has the right to know, and that state has legal fiduciary responsibility to clearly communicate for public consideration also include California’s policy option to issue its own credit, and the national policy option to issue money (not credit/debt) to directly pay for public goods and services.

And what does this mean?

A future of credit and money brighter than you imagined possible:

If California had a state-owned bank optimized for public benefit, a possible structure to pay our entire state tax burden would be 2% mortgages. This interest charge, as homeowners understand from typical 30-year mortgages, is significant money; it could be a public benefit rather than the privilege of our “too big to fail” bailed-out banks (more public banking information here).

Public banks could provide at-cost credit to cover any budget shortfalls from year-to-year, and eliminates the need for overtaxation “rainy day funds” in these thousands of government accounts. These facts at the state level in California are repeated by the two main political parties’ “leadership” in all states (explore here).

At the national level, we could create debt-free money rather than allow the private banking system’s pinnacle bank, The Federal Reserve, lend to us. Here are three simple points to explain:

  1. The US does not have a money supply; we have its Orwellian opposite as a debt supply. This is because the US leading banks won legal right through passage of the 1913 Federal Reserve Act to have private banks and the Fed create debt for what we use as money, charge the 99% for its use, and then redefine “inflation” to hide its inevitable consequence.
  2. The policy choice of a debt supply compounded with interest causes ever-increasing aggregate debt that can never be repaid. It can’t be repaid because this is what we use for money. The US national debt now pushing $16 trillion has a gross annual interest payment over $400 billion a year; ~$4,000 per US family of $50,000 annual income (if your household earns $100,000, then your gross annual interest payment is ~$8,000 every year).
  3. Monetary reform creates debt-free money that extinguishes national debt (details here), and allows government to become employer of last resort for infrastructure investment (hard and soft). This creates full-employment, optimal infrastructure, and falling prices because infrastructure historically creates more value to the economy than cost.

The Claremont Colleges held a conference to explore monetary and credit reform last month, for which I was one of the presenters. For those who want to review the papers and filmed talks meant for the general public to understand as clearly as I hope I’ve written here, explore this link.

And for even better news, consider resource-based economics as a predictable future beyond monetary and credit reform.

Finally, you might wonder about the six US corporate media giants with literally massive investment in these government investments funds buying their stock, and their prima facie conflict of interest to report what you’re reading here. It’s not as if these are new ideas; Benjamin Franklin is among America’s brightest minds who wrote on credit and monetary reform.

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  • xaxado

    As a fellow Californian Carl I really appreciate your work on this issue. My own small community in Northern California is addicted to debt, which is an insidious process. During the real estate bubble city government staffing increased by 50% but population growth was flat. Each department that increased staffing (all of them) lavished a higher salary on its department head. When it came time to shrink back to year 2000 government size, which worked just fine, nobody was willing to do that. Using the city treaurer’s report I was able to show the mayor how and why she should begin to fire people (with no net loss of service per capita). She said “I can’t do that! The city staff is made up of friends and neighbors!”
    In fact our town, and yours, are required to be in continual growth mode. This is part of a planning religion that seems to be unarguable, which in turn has deep roots in the UN Agenda 21 system, designed to rip off communities everywhere, to the benefit of transnational banks and corporations.
    Whenever we talk about a good idea, well thought through like yours or Ellen Brown’s, we are up against not only a debt based monetary system, but a growth addicted religion. I try to argue with planners about zoning for gardens and find they prefer yardless apartment buildings, with absolutely no consideration for the benefits of local food self reliance and working within rather than against nature. One can no more question decoupling the growth mandate than Galileo could advocate heliocentrism during the Inquisition.
    So what do we do about brainwashed bureaucrats? The bankers are quite sure that the money we depositors have loaned them (for virtually no interest) is really theirs, and they are determined to not give it back on demand. The local and state bureaucrats are quite sure that the resources belonging to we the people are really theirs and they are equally determined not to cede control over those resources back to their rightful owners. Doing that would put them out of a job and reveal that, since they are incapable of creating value, they should be first in line to starve to death.
    So, Carl, what do we do with thes people? To me thay are the precise definition of “worthless eaters” who we would all benefit from eliminating in the coming depopulation. What do you think?

    • Carl Herman

      I’m taking the argument on this narrow non-disclosure issue of the CAFR that it’s a crime. If local law enforcement, whose budgets are being destroyed from budget-deficit lies, agree then arrests might trigger full disclosure and our freedom. The state minions cover for War Crimes and Wall Street banksters at the national level.

      So far, my argument of national arrests for War Crimes and economic fraud with a “debt supply” rather than a “money supply” has no evidence of effect.

      So! We move forward in good faith as best we can imagine, and we’ll see what develops 🙂