California's $530 Billion Pension Bomb
The size of California’s ticking public pension bomb will no doubt blow many away. Stanford University’s Institute for Economic Policy released a report last week revealing that California’s three major public pension funds, CalPERS, CalSTRS, and UCRS, are underfunded by more than $530 billion dollars – yes, that would be half a trillion with a “T.” To put this in perspective, this is nearly six times the entire California state budget and four percent of the national deficit. While state politicians have been seeking solutions to California’s overspending –induced $20.7 billion dollar General Fund budget shortage, this study shows that the looming specter of baby-boomer pension costs is something that every Californian should be conscious of.
With California experiencing record unemployment and one of the highest tax burdens in the country, the economic outlook for California is bleak at best. According to California’s Legislative Analyst’s office, “the scale of the deficits is so vast that we know of no way that the Legislature, the Governor, and voters can avoid making additional, very difficult choices about state priorities.” As funding for infrastructure, student resources, and other programs has shrunk, the costs of public pensions have increased, diverting resources from where they are needed most. Clearly public pensions and benefits packages must be reined in, lest California be forced to declare bankruptcy.
With the chief actuary for the CalPERS calling the current pension situation "unsustainable" and California State Treasurer Bill Lockyer saying that public employee pensions will "bankrupt the state,” pension reform is a must. Reform will only come with compromise from public worker unions and a fiscally responsible state government.
To read about ATR’s recommendations for pension reform, Click Here.