New accounting rules from Moody's would result in the immediate bankruptcy of at least five California counties, yet the proposed changes are nothing extraordinary. In fact, the only thing extraordinary is the crazy optimistic returns the programs are currently assuming.
Moody's wants these counties to assume a 5.5 percent return on investments, not the 7.75 % they are using now. Yet, even to get five and a half percent in a zirp interest rate environment would require very aggressive, risky investing.
The counties at risk are Alameda, Contra Costa, Marin, Mendocino, San Mateo and Sonoma, which are big deep blue counties all. And all of them should be considered very affluent. Rolling in money.
Why does this not surprise me?
According to the article, these counties would have to pay all of their property tax income to support promised pension payments, or go through bankruptcy.
I thought these county governments existed to provide inexpensive and efficient services to those who live there, not gold plated benefits to "public servants." Perhaps each county should put the issue to the voters. Bankruptcy, or cut the benefits down to something reasonably affordable, and forget the crazy promises made by insane politicians over the years.
I wonder which way that vote would go?