California’s Growing Public Pension Crisis


Thursday December 8th, 2016   •   Posted by Craig Eyermann at 6:15am PDT   •  

26775841_s The Kersten Institute for Governance and Public Policy at Stanford University has a project that tracks the liabilities of pension funds for state government workers across the nation, where the liabilities represent the gap between the money that the pension funds hold and how much they would need in order to pay 100 percent of the retirement pension benefits that state government officials have promised to pay state government workers.

In California, the gap totals approximately one trillion dollars, which if equally divided among all Californian households, meaning each would have to give up $93,000 in either taxes, state government services, or both in order for California’s government workers to enjoy the lavish pensions they’ve been promised.

After extracting California and national data from the Kersten Institute’s database, ZeroHedge featured a chart comparing the growth of California’s household burden of state government employee pension liability with the average household’s state government pension liability in the United States, for the years from 2008 through 2015.

2016-12-02-pension-chart-2

Warren Meyer describes his reaction to the trend:

All that money you thought you were saving for retirement—it may be you were really saving it for your friendly neighborhood DMV worker’s retirement.

Why are California’s state government employee pensions such a problem? Writing at Forbes, Adam Andrezejewski of OpenTheBook finds the state is awash in gold-plated pensions for the state’s government employees:

The California Public Employee Retirement System (CalPERS) is the USA’s largest pension fund with $301 billion in assets. It’s also a lucrative transfer mechanism helping 1,251 local governments confer ‘highly compensated’ pensions to tens of thousands of public employees. Updated numbers displayed at OpenTheBooks.com show there is a $2.8 billion annual cost to payout 21,862 six-figure public-sector retirees via CalPERS.

It’s a massive payout equivalent to the combined income tax payments of nearly 1.6 million individual California taxpayers.

OpenTheBooks provides the following chart indicating California’s Top 10 state pensioners, who are collecting the biggest annual pension paychecks:

subscriber_chart_top_10_highly_compensated

Andrzejewski continues to describe how California’s government employee pensions are a ticking time bomb for the state’s taxpayers:

The golden state of government pension largess just might collapse under its own weight. Recently, CalPERS projected that there’s up to a one in three chance of entering a ‘crisis point’ of doomsday underfunding sometime in the next 30 years.

Still, there may some hope and relief coming soon. In August, a San Francisco based state appellate court held that reasonable benefit cuts are permissible in the pension system.

As is the case in pensions systems across the country, CalPERS shows that handing out lavish benefits to everyone – or the many – creates retirement security for no one.

California’s retirement pension plan for its government employees has become a national model of what not to do.




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