CA CAFR: local paper publishes 2nd letter asking Liu, Portantino responses

This is my latest e-mail to Wendy Gordon, Communications Deputy to California Assemblymember Anthony Portantino, and Robert Oakes, consultant to California Senator Carol Liu regarding the State of California’s Comprehensive Annual Financial Report (CAFR) and collective state CAFR’s from ~14,000 various government entities in the state:

Hi Wendy and Robert,

One of your constituents’ local papers, The Outlook, published a second letter on June 21 (copied below) requesting Senator Carol Liu and Assemblyperson Anthony Portantino’s public responses to CAFR data.

This is the beginning of our third week of phone and e-mail conversations (a measure of our public audience here). I have received:

I promised that I’d help Carol and Anthony shine on this issue. I also promised I would document and publish whatever I received.

So far, you ignored my easy-to-accomplish recommendation for a public statement that affirms the CAFR data, recommends public and independent cost-benefit analyses for reconsideration of these public monies, and initiates appropriate action in the California Senate and Assembly.

As such, here’re my recommendations now:

  1. Have a public statement with evidence of initiating appropriate legislation as press releases (Carol here, Anthony here) by Monday, July 2nd.
  2. Accept my offer to share your ethical response with local newspapers, my mailing list, and national publication audience.

I’ll call you both on Monday morning, June 25 to discuss this issue. Again, I’m willing to help anyone on your staff, including Carol and Anthony, to fully understand this objective and independently verifiable data on California’s official comprehensive financial report.

I’ll keep contacting you and invite interested press and readers to also contact you if:

  • the public does not have an official response by July 2nd,
  • if the official response doesn’t address CAFR data accurately,
  • if the official response obfuscates behind one of the usual “official” lies I’ve already communicated to both of you of “designated” funds that you then refuse to communicate options to “undesignate,” funds pensions when the data refutes that claim, and funds are needed for “rainy days” when both this is a rainy day and a state-owned bank eliminates such a need.

Finally, I respectfully remind you that any competent citizen armed with this data of $600 billion in public cash and investments should make it as public as possible, demand official ethical response, and be politely persistent until the public good is served.

If you doubt my intent, refute the data I’ve provided. If you can, I’ll publicly apologize, thank you, and correct my statements. But because I’m unaware of any refutation in the three years I’ve explored CAFR data, right now you’re sitting on $600 billion and doing nothing (and ignoring the state’s collective $8 trillion).

Here’s the published letter in The Outlook:

As promised, I contacted our state representatives regarding California’s Comprehensive Annual Financial Report (CAFR) data showing $600 billion in our public investment fund. Assemblyperson Portantino’s press representative Wendy Gordon, and Senator Liu’s Sacramento contact Robert Oakes both confirmed they received my request for public response to the seven points in this published article you can Internet search: “Californians’ $8 trillion in tax surpluses: what to ask your state, local reps”.

The $8 trillion is a sampling estimate of the total tax surpluses in California’s ~14,000 various government CAFR data.

If this figure is accurate, and it’s probably conservative, then each California household has been overtaxed by a present-day value of over half a million dollars ($500,000). 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.

The understandable need for “rainy day” accounts would not be needed if California had a state-owned bank like North Dakota to extend at-cost credit for temporary budget deficits (North Dakota is the only state with its own bank and the only state with increasing budget surpluses).

Our economic problems literally only exist on paper because we have workers and work to be done, game-changing technological breakthroughs, and capacity to issue debt-free currency to bring them all together. The article title above explains and documents the details.

I promise to provide updates on Anthony and Carol’s responses.

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  • LP

    Great work on this, Carl! This is one of those BIG things that’s been out for years now, but continues to be silenced. BTW, I just reviewed the 2011 California State CAFR, and from my own account, saw about $510 billion in net assets there (after liabilities are removed; otherwise about $950 billion with liabilites), ~$438 billion of which is sitting in investment trusts and pension funds, aka, wealth siphons. For all State-run pensions in FY 2011, it looked as though only $6 billion out of $25 billion in disbursements actually came from the funds themselves and not from employee/employer contributions (about 24%).

    This means that for all State-run pensions in CA last year, only 1.4% of the pension funds themselves were actually used to pay pensions even though they’re making ROIs of 10-14%. As Clint Richardson, Walter Burien, and others have detailed, the rest of that return will never go to the pension participants under the current scheme, but will continue to be rolled over and used, instead, only to increase collective government’s majority control of corporate governance both domestically and globally, thus feeding a vicious cycle of government and corporate interdependence and authoritarian control over everything and everyone.

    For those who think we are suggesting to just rob the funds for other things, we are simply saying there is a more effective and equitable way to use the returns on those investments instead of continuing to hoard them in the funds; certainly something better than just continuing to cut every social service imaginable and drive the last thriving sectors of economic growth out of the state.

    Sure, there are all those fancy actuarial calculations that say in X amount of years, the funds won’t be able to cover the increase in liabilities from the baby-boomers, inflation, wage-increases, etc.; same arguments we hear from Social Security, too. But these actuarials change each year and are soooo easy to doctor, based on many arbitrary values like future participants, exact interest rates used, and projections on the fair value of the investments held by the fund. Wouldn’t it be easy to always make these predictions come out showing the funds (or budgets) to be underfunded and thereby justify cutting benefits more, raising the retirement age, and increasing employee contributions. If politicians don’t claim they’re broke, how could they argue to take more? Just as laws were passed to set up the funds in their current state, with accurate information made available to the public, laws can be passed to improve upon the system, not just idly stand by as the whole system crumbles and wait til we all wake up homeless and hungry…

    Anyway, Carl Herman, Clint Richardson, and Walter Burien are really onto something here that threatens the oligarchy: since this enormous stash of wealth has already been stolen from the people, why not put it to better use and actually use the returns on investment to better society, instead of punishing, by combining these reserves with other obvious good ideas like a state-owned bank, tax retirement fund, and interest-free infrastructure credit for robust job and housing markets; of course with strict limits on how much can be used for these other purposes and exactly what for.

    Again, we’re not talking about spending the reserves, but simply utilizing the returns on them that currently get snowballed. This will only be possible if done at the grassroots level, for the bureaucratic vulture has no reason to give up its free meal unless we stop rolling over, one-by-one.

    Perhaps instead of vicariously waiting to find out what Carl hears from his reps., we could all take the lead and contact them ourselves with these same questions; just be clear, calm, polite, and persistent. At this point, how much more do we really have left to lose?


    • Carl Herman

      Thanks, LP. As I document from the CA CAFR, investment income was listed at $10 billion (all rounded to nearest billion to make this simple to see), expense for the investment fund was $3 billion, which means a net income return going to pensions of ~$7 billion. BUT: since the investment fund earns interest from owning $92 billion in other government debt securities, we need to subtract the interest cost of California’s $164 billion in its own debt of $6 billion.

      So that means net income going to pensions of a $600 billion fund is just $1 billion. The average net income contribution since 2008 is actually negative (interest and expense were greater than investment income).

      So a “pension” fund does not fund pensions: taxpayers contributed $19 billion, plan members $7 billion, and the fund just $1 billion.

      Yes, I encourage people to run with this data if they’d enjoy doing so and/or feel the civic responsibility.

  • gozounlimited

    Bill Moyers, Matt Taibbi and Yves Smith clarify issues surrounding bank fraud and government corruption.

    Matt Taibbi and Your Humble Blogger on Bill Moyers…..Yves Smith

    Hope you enjoy this segment. I think I can speak for Taibbi in saying we had a good time with Moyers.

    For those who prefer viewing the program on a bigger screen, it runs in NYC and DC on Sunday at 6:00 PM. The staff is trying to organize a Twitter Q&A at that time (6:00 to ~6:40 EDT). I haven’t gotten confirmation that this is a go, but I’ll let you know in tomorrow’s Links (and they’ll be providing a hashtag).

    see video: