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Monday July 20th, 2015   •   Posted by K. Lloyd Billingsley at 10:53am PDT   •  

calpersLogo_200California taxpayers, the most embattled in the nation, have good reason to wonder how much their government is spending. According to Dan Walters of the Sacramento Bee, a veteran observer, government is spending a lot more than people think. The 2015 state budget has been reported as $115.4 billion, for the general fund, and $167.6 billion, which includes special funding for highways and such. Both numbers are “correct as far as they go,” Walters says, but they don’t go far enough. For example, the budget fails to include pensions paid to retirees by state pension trust funds, including the California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS). These payouts, Walters says, total about $30 billion a year.

As Walters recently noted, in 1999, Gov. Gray Davis and the legislature boosted state pension benefits based on assurances from CalPERS that it’s investment earnings would cover the costs without burdening taxpayers. These assurances turned out to be “fallacious,” says Walters, noting that last year CalPERS “earned an anemic 2.4 percent on its investments in the past year, less than a third of its 7.5 percent target.” And CalPERS value plummeted by 25 percent in one year alone. CalPERS “sharply increased its mandatory contributions from the state and its local government clients to cover losses, dramatically raising pension costs” and pension obligations “figured prominently in the bankruptcies of three cities.” This does not disturb the state’s comfy ruling class.

According to government union boss Brian Rice, president of Sacramento Area Firefighters, this is how the state promotes economic growth. Each year, Rice claims, the CalPERS alone “creates $30.4 billion in economic activity” and the teacher’s retirement system, CalSTRS, generates “an $11 billion boost to the economy.” It’s the trickle-down theory, good for those on the gravy train but a bad deal for taxpayers. The pension problem, meanwhile, is actually much worse.

In his research for California Dreaming: Lessons on How to Resolve America’s Public Pension Crisis, Independent Institute Senior Fellow Lawrence McQuillan discovered that from 2008 through 2012, California’s local governments pension spending increased 17 percent while tax revenue grew only 4 percent. Ventura County’s pension costs soared from $45 million in 2004 to $162 million in 2013. And California accounts for $550 billion to $750 billion of the $4.7 trillion in unfunded pension liabilities nationwide. So governments everywhere are spending more than they claim, and much of the spending is on pensions for ruling-class retirees who support the status quo and resist reform.

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July 2015