By Daniel Borenstein, Staff Columnist
Posted: 02/07/2014 12:00:00 PM PST
Updated: 02/09/2014 08:10:25 AM PST
Kudos to Gov. Jerry Brown for demanding last week that CalPERS stop kicking pension debt further down the road. Too bad he hasn’t applied the same standard to the CalSTRS shortfall.
The state is home to the nation’s largest pension system, the California Public Employees’ Retirement System, and the second largest, the California State Teachers’ Retirement System.
Between them they have shortfalls of about $180 billion — debt we are now passing on to future generations because of past failures to properly fund the system. That’s more than $14,000 per California household. The longer we postpone paying it off, the greater the cost, as anyone with a credit card should understand.
That’s why the governor Wednesday sent a stinging letter to the CalPERS board protesting its plans for delaying repayment of newly added debt. “No one likes to pay more for pensions,” Brown wrote, “but ignoring their true costs for two more years will only burden the system and cost more in the long run.”
As previously reported in this column, CalPERS’ actuary says the pension system has been undercharging the state and local government agencies because it failed to properly predict increasing life expectancies and earlier retirements.
That means the money CalPERS previously collected was insufficient. Fixing the actuarial assumptions creates new unfunded liabilities for pension benefits workers have already earned — debt that must now be paid off with increased contributions. It also means the system should be collecting larger payments in the future to cover the pension benefits associated with employees’ future labor.
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