Fresno City financial disaster

Budget Director Renena Smith and her staff write that City Hall in FY2012 will pay $17,349,100 in debt service payments. The entire general fund is expected to take in $214,619,000 next year. Debt service payments will be 8.1% of the general fund.

But these debt service payments don't include the city's bill for the pension obligation bonds. These are bonds dating back about 20 years that were issued to fund the city's pension plans. The general fund's share of payments on these POBs in FY2012 will be $12,046,000.

So now the general fund debt service payments are up to $29,395,100 in FY2012. That's 13.7% of the general fund.

But we're still not done. The POBs in the late 1990s and early in the 21st century were invested. The returns were so good that the city didn't have to make cash contributions to the pension programs. The city spent the savings, in part on employee raises that added to the city's pension obligations.

Then the recession hit. The city now must pay cash to the pension programs to keep them fully funded. In FY2012, the city will contribute $23,989,000 of general fund money to the pension systems.

Anyone want to guess what the payments will be in, say, 2021 if the Dow doesn't rise 18% every year for the next decade? Anyone want to guess how many investors throughout the world are chasing after the guaranteed 8% return that Fresno's tiny (relatively speaking) pension systems must have?

Add the $29,395,100 in debt service payments and the $23,989,000 in direct pension contributions and you discover that the general fund in FY2012 is facing $53,384,100 in debt payments of one kind or another. That's 24.9% of the general fund.Fresno Bee

On top of that, the County of Fresno now devotes over 30% of taxes to prior pension obligations. It is all over but the shouting, and there is going to be lots of that.

Here the Fresno Bee joins 10 other California dailies in calling for pension reform.

Jerry Brown and Gray Davis get most of the blame.