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Blue Model Blues
Pensions Are a Problem in the Heart of Silicon Valley

Google’s booming hometown of Mountain View, California, which has a jobless rate of below three percent and a median family income in the six figures, may need to raid its rainy day fund to cover its unfunded pension liabilities for public employees. The Mountain View Voice reports:

Under a plan put forward by the city’s finance team, Mountain View would draw about half that amount ($6 million) from its reserve fund, a pool of money normally set aside for emergencies. But by doing so, they warned, the city would need to tweak its longstanding policy to keep at least 25 percent of its general fund in reserves, which could threaten the city’s AAA bond rating. That isn’t very likely, said Finance Director Patty Kong. She assured the council that bond-rating agencies would probably look favorably on the “positive action” the city took to pay off its pension costs.

Still, some council members said they were nervous about touching the city’s $26 million in emergency savings for something that was hardly an emergency. Councilwoman Margaret Abe-Koga suggested pulling money from the city’s other funds to keep its reserves intact.

Many local governments are getting squeezed, as Calpers, the state pension fund, demands higher contributions to cover exploding costs. But the fact that even Mountain View is struggling to come up with the money highlights how grim the situation is for the state as a whole. Not all California towns are home to huge wealth-creating enterprises and affluent tax bases; in fact, many inland areas have been hemorrhaging high-paying jobs for years.

Mountain View will probably be OK in the long run, but the tightening pension vise will exact a devastating toll on the public services of cities and towns elsewhere in the state.

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  • QET

    Puerto Rico probably thought that it “would be OK in the long run.” Ms. Abe-Koga is on the right track, though were the Council to attempt this I would imagine those from whom the funds were reallocated would put up quite a fight. I’m surprised a good Democrat-controlled state like CA doesn’t levy a one-time surcharge on Google of, say, 10% of its market cap. That’s a cool 60 billion right there.

    • ——————————

      And they could get another 80 billion doing it to Apple…..

  • Fat_Man

    “Mountain View will probably be OK in the long run”

    Is that the one in which Our Lord Keynes said we would all be dead?

    • Jim__L

      Keynes said he would be dead. The rest of us poor descendants can fend for ourselves, he wanted to make sure he got his.

      • Fat_Man

        “The long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is past the ocean is flat again.”

        • Jim__L

          The cost of his way of solving crises was to ensure worse crises for us, down the line.

          Keynesian economics makes sure the seas are never truly calm again.

  • Andrew Allison

    The quoted text is misleading. The full text shows that the $12M will simply reduce Mountain View’s (growing) unfunded liability from $55M to $43M (which represents one-third of the entire city budget). In the long run Mountain View, like most CA cities, will be far from OK.

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