by Lou Binninger
The town of Loyalton may be the first city to go into default with Cal PERS, the state’s employee pension plan. Loyalton is a story of pioneers settling the area in the 1800s alongside the nomadic Miwok and Washoe Native Americans. It is also a story of how regulations, special interests and a corrupt mismanaged Cal PERS ruin communities.
California became a state in 1850. Loyalton, once called Smith’s Neck, was renamed in 1863 to reflect loyalty to the Union during the Civil War. The town and the region now called Sierra County were part of a larger Yuba County.
However, after two years, the area proved too difficult to govern from Marysville. The only officials venturing the long distance to the snowy high country were tax collectors. Downieville became the seat of the new county.
Legal matters were settled by locals and the area is known for the state’s only hanging of a female. On July 5, 1851, a young woman named Josefa Segoria was hung from the Downieville Bridge for stabbing a man to death while resisting his advances.
Newcomers developed farms and ranches, the timber industry, and gold mines. Their beef and butter were prized in Sacramento, San Francisco and Reno. Hundreds of millions of dollars in gold were extracted. Four major sawmills providing life-long employment were a boon to the county. A railroad moved the lumber prior to the development of the trucking industry.
Eventually, gold mining tailed off. Extreme state regulations and socialist control of the dairy industry made the county’s well-known but small dairy operations unprofitable.
Environmental extremists leveraged liberal lawmakers in California and Washington DC until the Clinton Administration shut down the timber industry. Anti-timber forces got their way pitching junk science about an owl. The Spotted Owl’s decline continues today in a people-free forest although the Bard Owl was the real culprit killing off its weaker cousin.
Three quarters of the land around Loyalton is owned by the federal government and to “protect the Spotted Owl” the forests were declared off-limits to loggers. The last sawmill and Sierra County’s biggest employer ended operations in early 2001. More than half the mills in the state are now closed.
As a result, most of Loyalton’s businesses have been boarded up. The hospital went bankrupt. In 2015, the population was at 733 down from 1,030 in 1980. People have relocated or travel to Reno and Tahoe for employment. School officials wonder whether they can afford to stay open.
In March 2013, the city council voted to withdraw from CalPERS and cut salaries on their one full-time and four part-time employees. The city was going broke and could not afford its premium payments.
Recently, Loyalton received a Cal PERS bill for $1.66 million for future payments, withdrawal fees and interest at 7.5%. That is $2,264 per remaining resident. Dropping out of the mafia is less painful.
Patsy Jardin, 71, was notified that she may lose much (up to 60%) of her $48,000 annual pension because the city failed to fund its long-term liabilities. John Cussins, 55, with a $36,000 pension, is in the same predicament. Two other retirees are also affected.
Loyalton council member Patricia Whitley, who voted to terminate the CalPERS plan, said a 50% pay raise that may not have been legal made pensions unaffordable. That sounds a lot like Sutter County Supervisors’ 2004 deceptive 35% raise for employees retroactive to the date of employment. A manageable pension liability is now out of control. Yuba County also granted their employees a similar financial windfall.
CalPERS has been damaged by flawed politically correct investments, kick-backs taken by administrators and horrible returns. Rather than generating projected earnings of 7.5% annually they are getting under 1%. That has created a massive deficit that the state, cities, counties and agencies will have to make up since CalPERS needed a 7.5% return to meet their pension commitments.
Now what? Government services will be cut and new local taxes will be added to make up the deficit. Expect to pay more for less in the near future while government salaries continue to increase.