By Dan Walters
July 23, 2016 – 2:00 PM
- Pension problems stem from 1999 benefit boost
- Unemployment insurance ills rooted in 2003 benefit boost
- Stockton violates austerity budget to reopen library
One day last week, Daniel Borenstein, a columnist for newspapers in the Bay Area News Group, published a critical analysis of the California Public Employees’ Retirement System’s long-term finances.
A few days before, CalPERS had reported a measly 0.61 percent return on its $300 billion investment portfolio, the second year of flat earnings.
Borenstein pointed out that it now has “a record $139 billion shortfall” in what it needs to cover promised pensions for public workers and “that’s $46 billion more than just two years ago.”
Given what CalPERS’ investment staff sees as a prolonged period of modest earnings, Borenstein sharply criticized the trust fund’s overseers and politicians for their head-in-the-sand assumption that higher earnings will close the gap.
By doing so, officials are saddling future generations of Californians with countless billions of dollars in ever-growing pension debt whose costs will crowd out spending for more important services.
On the same day, Michael Fitzgerald, a columnist for the Stockton Record, published a column about his City Council’s decision to reopen a library even though it violated a long-range austerity budget that the city had enacted to extract itself from bankruptcy.
Earlier in the week, yours truly had also penned a column about CalPERS’ long-range financial peril, and later in the week, wrote another that highlighted chronic, long-term problems in the Unemployment Insurance Fund.
All of these journalistic efforts last week had similar themes: the tendency of public officials at all levels to ignore their decisions’ long-term consequences.
The unemployment insurance problems are rooted in a 2003 decision by then-Gov. Gray Davis, facing a recall election, and legislators to boost unemployment benefits by nearly 50 percent without raising payroll taxes to pay for them.
CalPERS’ problems stem not only from overly optimistic earnings projections, but a 1999 decision by Davis and legislators to sharply increase state pension benefits – retroactively – based on those rosy assumptions, and the subsequent lemminglike decisions by local officials to embrace the state’s pension increases.
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