For years, California’s pension crisis has been swept under the rug by powerful public unions and pliant politicians who over-promised and underfunded pensions for government workers. But the jig is almost up, and taxpayers are going to notice. Bloomberg reports:
California cities and counties will see their required contributions to the largest U.S. pension fund almost double in five years, according to an analysis by the California Policy Center.
In the fiscal year beginning in July, local payments to the California Public Employees’ Retirement System will total $5.3 billion and rise to $9.8 billion in fiscal 2023, according to the right-leaning group that examines public pensions.
The increase reflects Calpers’ decision in December to roll back the expected rate of return on its investments.
Calpers has concealed the depth of the pension shortfall by using unrealistic rates of return in its accounting estimates. But to stay solvent, it was recently forced to cut its projected rate from 7.5 percent to 7.375 percent (with more reductions almost certainly on their way). The state will need to make up the difference with tax increases and austerity.
Democrats may be able to force through new taxes (California’s are already among the highest in the country) to plug a part of the funding hole. But education and social services are sure to take a significant hit as well, especially in counties removed from the booming coastline—meaning that California’s most vulnerable residents will pay much of the price for the state leadership’s long-running mismanagement of public funds.