Wednesday, May 3, 2017

Walters: California's Pension Crisis vs. New York's Pension Recovery

Dan Walters of the Sacramento Bee is further diagnosing the comatose patient that is called "California."

Yes, the pension liabilities are huge, and the state legislature is doing nothing to stop it.

A better question -- how long will it take before individuals take note?

Perhaps the deleterious consequences of public sector employees suddenly realizing that all the rich promises from elected officials will not come through.

Because of math.

Yes, elections do have consequences, and they fall on the altar of public sector unions who try to purchase  politicians to do their bidding.

There is just one problem: no matter how nice and promising the pension and benefits packages may be, there is no guarantee that the money will be there to pay for them.

So, what is the sad state of pensions in California, according to Dan Walters?

Throughout California, local government and school district officials are writing new budgets and confronting rapidly rising costs of pensions.

How about that?

And the services that these public districts provide to their constituents is rapidly, rapidlly declining.


Many have seen their costs double in the last few years, largely consuming revenue increases that the state’s expanding economy have produced. For instance, a projected $1 billion increase in school districts’ teacher pension costs in 2017-18 will more than equal projected revenue gains.


However, as the old rock song says, “You ain’t seen nothing yet.”

Lackluster earnings by pension trust funds, revised actuarial projections and impacts of benefit increases are compelling the systems to sharply increase mandatory “contributions” from public employers.

These poor earnings will only get worse as more cities as well as the state goverment engages in pension divestment virtue signaling.

They don't want to invest in guns or coals, two very popular market shares.

How then do they expect to make any money? What kind of returns do they expect to get for the drastically increasing pension costs?

This progressive inanity is turning into pension insanity!

Pension systems in other states contended with the same macro conditions but, as the Pew report shows, most have been much more diligent in adjusting.

Let's look at what Wisconsin did. The liabilities hitting the Badger State were three billion dollars in 2011. Instead of raising taxes or laying off workers, Governor Scott Walker and the state legislature passed massive collective bargaining reforms, which limited the power of  the public sector unions fleecing the state.

They lost, the taxpayers won, and Wisconsin has the  most solvent pension system in the country.

That's small potatoes in the face of the multi-billion (now approaching trillion) dollar pension tsunami drowning the state of California.

Ed Mendel, a veteran journalist who writes a blog about pension issues, points out that as California was collecting just 79 percent of what it needed in 2015, New York’s big pension fund upped its contributions to 163 percent and is 98 percent funded.

WOW! New York is actually doing a pretty decent job of funding its public sector retirees?! How did they manage to do that?

Because New York was diligent in dealing with declining earnings, as Mendel points out, it actually hits state and local employers relatively lightly, charging them only about two-thirds of California’s rates as percentages of payroll.

All of this implies that California’s public agencies and taxpayers can expect ever-higher pension fund demands – unless something is done to markedly reduce the cost side of the pension ledger.

Appellate courts have ruled that the “California rule,” which seemingly prohibits changes in public pension benefits, may not be valid, and the state Supreme Court will have the last word.

It could be the only way to prevent a complete meltdown of California’s already precarious pension systems.

But will it matter?

Final Reflection

So, what is to be done about California?

It looks like the last dog will have to be hung before there are any real changes in the not-so-Golden State. The best innoculation to abject liberalism is a full surfeit of it, and California is going to get a heavy dose of it in the next year.

What is it about New York State, however, that their pensions problems have been relatively resolved?

First of all, it's not a Democratic trifecta in the truest sense. A coalition of Republicans and moderate Democrats have joined to oppose Big Spending Andrew Cuomo in Albany.

The more conservative phalanx has put a stop to all kinds of bad ideas, including DREAM Act legislation for illegal aliens.

Hopefully, they have harassed Cuomo enough that he won't run for Governor again.

In California, one can only hope that a Republican Governor can restore some kind of solvency back to Sacramento.

But once again, one can only hope.

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