By Dan Walters
11/18/2014 10:15 PM
State Controller John Chiang performed an admirable public service by publishing a detailed report on the finances of California’s public employee pension systems.
The most eye-popping fact in the report is that the “unfunded liabilities” of those systems exploded from $6.3 billion in 2003 to $198.2 billion in 2013.
Why? It was a perfect storm of irresponsibility.
Benefits were increased, contributions from governments and employees were cut back on assertions that high earnings on investments would pick up the cost, and speculative investments tanked during a severe recession.
Those unfunded liabilities – in effect, long-term debts – will haunt state and local governments for decades as other forms of public spending are squeezed to cover the immense pension gap, even if those in charge are loath to admit it.
The University of California, for instance, is planning to raise tuition by 5 percent a year over the next five years, saying it’s needed to maintain academic quality. But The Sacramento Bee’s Alexei Koseff revealed a big reason the money is needed is to cover UC’s pension fund shortfalls.
Two California cities, Stockton and San Bernardino, declared bankruptcy largely because of crushing pension obligations, but neither intends to seek pension relief even though Stockton’s bankruptcy judge says they could. And now one Stockton creditor is appealing that refusal to a higher federal court.
Many other cities are feeling the pension crunch, and while they may not file for bankruptcy, they are being compelled to chop other spending to make payments to the California Public Employees’ Retirement System that in many cases have quadrupled – or raise taxes.
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