mead cohen berger shevtsova garfinkle michta grygiel blankenhorn bayles
Golden State Blues
Californians Are About to Start Noticing the Pension Crisis

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.

Features Icon
Features
show comments
  • rheddles

    And those in the middle will vote with their feet. It’s almost like Obamacare.

  • Matt Book

    This is not mere incompetence. It became an elaborate scheme to plunder the citizens of the state. Politicians betray their feduciary responsibility in return for the political heft and monetary support of the unions to keep them elected. I guess they counted on the ignorance and short-sightedness of the public; in that the politicians were very competent.

  • Blackbeard

    This is why the Democrats must control the federal government to survive. The deep blue states (California, New York, Illinois, etc.) are going to need massive bailouts but with a Republican in the White House it will never happen.

  • CaliforniaStark

    On a related note, a California appellate court in San Diego today issued a ruling upholding the pension reform initiative approved by San Diego voters in 2012. The measure replaced the existing pension system for city workers with 401(k) plans. It is a critical decision; which is likely to be appealed to the California Supreme Court. The measure passed by 65% of the vote in 2012.

  • Boritz

    The worst outcome of this is that it is inflating real estate in Texas.

© The American Interest LLC 2005-2017 About Us Masthead Submissions Advertise Customer Service