The state of California’s real unfunded pension debt clocks in at more than $500 billion, nearly eight times greater than officially reported.
That’s the finding from a study released Monday by Stanford University’s public policy program, confirming a recent report with similar, stunning findings from Northwestern University and the University of Chicago.
To put that number in perspective, it’s almost seven times greater than all the outstanding voter-approved state general obligation bonds in California.
how truly awful. The 60’s generation feathered their own nests, grew rich from gowing false economic bubbles- sold houses at vastly infated prices and rendered their own children unable to get on the housing ladder. Now those who bankrupt morality, society, faith and all else tell us we MUST honour their retirement costs at unaffordable prices and the cost must be born by those who follow.
Has there EVER been a more indulgent, destructive and selfish generation?
Has there ever been a more indulgent, destructive and selfish generation? NO Statmann
No, but with Obamacare we are not doing so badly ourselves.
Ah, but I think that the indulgence, destruction, and selfishness was in the prior (“greatest”) generation, and especially in the 50s generation. The 60s generation merely followed the example, albeit with different politics. Now, we are seeing the follow-up generations continuing in the path to destruction. I mourn.
The problem cannot be solved until government-sector unions are broken and ultimately prohibited. If government sector wages were in line with what’s paid out here in the real world for the same work, most state budgets would be in surplus.
A union is nothing more than a system for extorting wages higher (usually much higher) than the market-clearing level for the work involved.
When government sector workers garner wages 45% higher than the private sector for the same work, claim a right to (unfundable) pensions unimaginable in the productive sector, and then demand that those of us actually producing things continue to support them in the style to which they are accustomed …
… they are no different from the French nobility of 1790, and perhaps deserve much the same fate.
House on the market – step one in exiting California
This would explain the need for death panels . . .
Query: If I go to work for employer A (whether in the private sector or government) and it tells me that I will be paid X amount (with Y coming in the form of an immediate paycheck and Z in some form of deferred compensation), how is it different for A to short me on the deferred component of the salary I have earned than to refuse to pay me the agreed immediate paycheck? How is that different from walking into a store, agreeing to pay $10 for something, and then walking off with the item after paying only $5? How do those of you who have suggested above that California should default on its contractual obligations to those who have traded their labor for an agreed wage justify theft?
I tend to agree with Dale Rye here. I have a relative who has worked his entire professional life for the State of California in a position which has not been high-salary. The trade-off was supposed to be that his pension would take care of the savings he was unable to accumulate (he does not live extravagantly). The California legislature has failed to fund the pension system, spending its money instead elsewhere, thus bankrupting the state and committing fraud on my relative, who now fears the promised pension will not materialize.
I agree with Dale Rye on the legality issues. Promises were made. The fault lies with the California assembly who never saw a union package it didn’t like and didn’t worry about paying for.
But I disagree strongly with Katherine. Study after study has shown that it used to be the case that government workers accepted less pay for guaranteed retirement, but those days have been gone for quite a while. Now government workers make more on average than private industry AND they have guaranteed retirement, which means they have more discretionary income to spend during their working years because they don’t have to put aside large portions of it for retirement, as private industry workers do. We figured out we would have to save up several million dollars for retirement to generate the income needed since we don’t have guaranteed pensions, yet the government limits the annual amount we can put into a 401, and I can’t even get the benefits of opening an IRA for myself because my husband’s salary is over that limit. The government is limiting our ability to save yet in California, some public employees are retiring at ABOVE their salary level. Yes, they are making more in retirement than they made as workers. This is unsustainable and unfair to the taxpayers.
Branford, the study I saw recently applied to federal employees, and I’ve also seen articles about some union members in California getting high salaries in addition to excessive pensions. None of this applies to my relative, however. He has not been highly paid and is in danger of having his pension cut as well. Generalizations always have exceptions.
Actually, I should say that I don’t disagree with Katherine’s statement, since she is citing actual facts – I disagree with the implication that government workers are working at below level salaries, since studies have shown this not to be accurate. (Here’s one study on federal pay and here’s a site that has gathered info on California, although state benefits are not figured in here.)
Sorry, Katherine, we cross-posted. I do think that the state of California legally obligated themselves and need to figure out what to do. That said, services will be cut before the unions are called to task.
Dale,
The problem that you overlook is why the pensions became so large and unfunded. The “why” was a huge misunderstanding about the nature of defined benefit pension plans.
In a DB plan the employer is responsible for payment, regardless of the performance of the assets. If assests do well, the fund may be overfunded. If it does poorly, the employer must make up the difference.
In the late 90’s the CalPERS fund was massively ovefunded during the dotcom boom. So Democratic legislators saw a chance to curry even more favor with the union. Let’s raise pensions, they said, “after all it’s the employees’ money.”
With the crash of dotcom stocks and the new, higher pension funding requirements, suddenly CalPERS was masively underfunded. Ten years ago!
When this came to light, voters angrily recalled Gov. Gray Davis (who had also blown it trying to compete with ENRON in energy trading). So the pensions never should have been raised.