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Blue Civil War
California Pension Meltdown Hits Schools Hard

We noted earlier this month that the California state pension fund’s decision to reduce its expected rate of return would force much larger contributions from the state and local governments, reducing the amount of money available for public investments. The situation is especially dire in the state’s public schools, which will need to drastically cut spending on staff and facilities and educational programs to pay mounting pension bills for retirees. The San Francisco Chronicle reports:

Public schools around California are bracing for a crisis driven by skyrocketing worker pension costs that are expected to force districts to divert billions of dollars from classrooms into retirement accounts, education officials said.

The depth of the funding gap became clear to district leaders when they returned from the holiday break: What they contribute to the California Public Employees’ Retirement System, known as CalPERS, will likely double within six years, according to state estimates. […]

School district officials say that unless the situation changes, they will have to make cuts elsewhere, possibly leading to larger class sizes, stagnant worker pay, fewer counselors and librarians, and less art and music in schools. Insolvency and state takeover are not out of the question for some districts.

Needless to say, it is the children in the poorest school districts who will be most affected by the coming cuts in California’s educational budget. This sets up a potentially disruptive conflict between two key Democratic constituencies: Lower income people who depend on government services, and the public sector unions that provide those services. Parents of students at low-performing schools will rightly protest against funding reductions, but teacher unions will not accept any reforms to the overly-generous and poorly-managed public pension system.

The fiscal vise is just starting to tighten in California. CalPERS has reduced its expected rate of return by an eighth of a percent, but is still operating under highly unrealistic assumptions. According to an estimate from Stanford’s pension tracker, the state’s public employee pension shortfall exceeds a trillion dollars. And as Catherine Rampell points out, several economic policies coming out of a Republican-controlled Washington are likely to further worsen the fiscal conditions of blue states. As the bills start to come due, keep an eye on whether and how the intra-Democratic fight over scarce resources shakes up politics in the Golden State.

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  • Suzy Dixon

    CA is a total mess. A lot of it needs to steal water from other states to support desert, unsustainable monstrosities, like LA. And they can’t manage money for the life of them. So sad.
    Notice how the Democratic Party always uses projection?
    In reality, the Republicans were not having a civil war, the Dems were/are.
    In reality, the Republican platform is winning, and the progressives are not. Neither are the establishment, corporate Dems for that matter.

  • Fat_Man

    “several economic policies coming out of a Republican-controlled Washington are likely to further worsen the fiscal conditions of blue
    states”

    It makes me happy to see them suffer.

    • FriendlyGoat

      It’s a substantial irony that Republican Washington will be giving greater high-end tax cuts to a relatively small number of people in those big blue states than it would take to solve the budget problems of the schools and pensions in big blue states. You cannot say that EVERYONE in those blue havens are going to suffer as a result of Republican control—–just the poorer people, which is always the case with Republican control of anything.

      • Psalms564

        I’m happy to report that I’m not going to suffer and I’m a resident of indigo blue state. Democrats promised democrats that if democrats will continue to vote for democrats they will receive large pensions that are funded by a magical pension fairy. Once again, unions are a blight on society. Good to see them go down in a blaze of glory.
        “It’s a substantial irony that Republican Washington will be giving greater high-end tax cuts to a relatively small number of people in those big blue states than it would take to solve the budget problems of the schools and pensions in big blue states. ” Really? Shortfall in CA is 1 trillion. We are getting a trillion dollars in tax cuts? I noticed that your familiarity with truth seems to disappear. I get it. Democrats have halos, Republicans have horns.
        I can’t help but feel we talked before.

        • FriendlyGoat

          Yes, the high end of the blue states may well be getting enough in tax cuts to completely solve the pension and school problems in their states. California’s “trillion” is a measure looking far into the future. So is the accumulated total of the taxes to be foregone from the trading titans on your coast and the tech titans on the other coast over a long time into the future. You may indeed be getting a trillion—-possibly several over decades. We have to wait and see what details are proposed. There is no reason now to not expect something yuuuuge in that regard.

          • Psalms564

            let’s be honest. We seldom agree. But I’m glad to share my joy with you at the upcoming yuuuuuuuuuuuuuuge tax cut. I deserve it. Everybody got paid during Obama years. Now it’s my turn at the trough. I at least work for a living. I’m gonna be up at 5am tomorrow, but if this tax cut happens, kids are gonna get an in-ground pool, along with the chores associated with that pool. Hopefully, my kids will be happier which will make me happier. knowing how much you hate the fact that I can do this would only add to my pleasure of it. People who suffer from envy are the easiest to wound.

        • Beauceron

          “Democrats promised democrats that if democrats will continue to vote for democrats they will receive large pensions that are funded by a magical pension fairy.”

          The thing is, that isn’t what happened. It was worse and far more cynical than that. Democrats purchased votes using taxpayer money. They wanted union votes and they bought them–put us in power and get paid. It’s not that union members are Dems by inclination or nature, it’s that the Dems paid for their vote. The Democrats also use taxpayer money to get Leftist broadcasters like NPR/PBS, and their Leftist think tanks at state universities. They’re good at getting taxpayers to foot the bill. Now the bill has come due.

          • f1b0nacc1

            Democrats didn’t purchase, they RENTED votes, perhaps they leased them. I suspect that in many cases they area bout to discover this, and I will enjoy watching them do so.

      • Fat_Man

        Must not argue with Goat. Must not argue with Goat. Must not argue with Goat. Must not argue with Goat. Must not argue with Goat. Must not argue with Goat. Must not argue with Goat. Must not argue with Goat. Must not argue with Goat. Must not argue with Goat. Must not argue with Goat. Must not argue with Goat. Must not argue with Goat. Must not argue with Goat. Must not argue with Goat. Must not argue with Goat. Must not argue with Goat. Must not argue with Goat.

        • ——————————

          Why, not?

          Sometimes it’s fun just to try to get Goat’s goat!….

          • Fat_Man

            I will tell you what I said to the clerk at the Cheese shop yesterday. No Goat!

        • FriendlyGoat

          Fine with me. Don’t.

  • Beauceron

    I read today that a recent poll showed 1 in three Californians want to secede. So maybe we won’t have to worry about it.

    • Jim__L

      The other two probably live in Eastern California, which is made up of Red counties across the board.

      If Cal really does secede, look for those counties to leave California… and take California’s water supply with them.

    • ——————————

      Yeah, but 3 out of 3 Californians are more concerned with what the Kardashians or Snooki are doing, so I wonder how much they really understand the ramifications of a secession….

  • nervous122

    In the past month, Cali discovered a $1.5 billion hole in its budget, its HSR project is running 50% over budget, and now the pain of the pension shortage is about to kick in.

    Go ahead and secede.

    • f1b0nacc1

      Look at the bright side, the average IQ of the US would probably rise a few points…

    • CaliforniaStark

      It should be noted there already is a movement in northeast California to break away from California and form an independent state. The board of supervisors of Siskiyou, Modoc, Glen, Tehama, & Yuba counties have already voted to support succession, and submitted their request to the California Secretary of State. Lake, Sutter and Lassen counties are moving forward in that direction. The name of the new state is often referred to be “Jefferson.” There is some support in southern Oregon to join it. If California did attempt to succeed, a lot of northern and central valley areas would break away and stay in the U.S.

  • seattleoutcast

    Municipal bankruptcies coming your way…

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