There is not enough space on this note to catalogue the media circus associated with this year’s mid-term election cycle in the United States. Therefore, I will focus a single topic close to home. In San Francisco, Proposition B is on Tuesday’s ballot. This proposition addresses Pension Reform and, if passed, would require city employees to increase their contribution to health care and pension costs. Similar to many cities, states and countries; when the economy was booming, investment returns addressed a large part of San Francisco's pension obligation. However, that is no longer the case. The city is now expected to contribute an increasing part of its operating budget to address pension costs, which reduces the funds available for other city services.
MY TAKE: Globally, addressing pension obligation issues will require many hard choices. The core debate focuses on how to preserve critical government services and protect jobs, while avoiding politically expedient “quick fixes”, or “kicking the can down the road”. The outcome of the vote in San Francisco may help to shape the larger pension fund debate. Taking a broader view of the US political landscape, Tuesday’s elections will likely provide several surprises for investors to factor into their market outlook.