But PRI is not alone. The California Policy Center has been covering the issue in depth, as well, most recently with “The Underrecognized, Undervalued, Underpaid, Unfunded Pension Liabilities” this month and “How to Restore Financial Sustainability to Public Pensions” in February.
The former shows just how far in the hole the California Public Employees’ Retirement System is while the latter is a sober analysis — a judicious takedown, really — of a League of California Cities study of the government employees’ retirement system. For instance, Edward Ring, a co-founder, and former CPC president, takes the evasive language of the League of California Cities’ recommendations and explains them in real terms. “Measures to enhance revenues” are really tax hikes, while “chang(ing) service delivery methods and levels of certain public services” means “cut(ting) services.” The recommendation to “issue a pension obligation bond” is just another way to say “go into debt to pay off debt.”
Ring finishes with a list of suggestions for local elected officials who are serious about the “unsustainable pensions.”
If policymakers continue to do nothing more than watch the crisis grow, it will truly be, as City Journal senior editor Steven Malanga so colorfully put it, “The Pension Fund That Ate California.” The Stanford Pension Tracker says the state’s total pension debt is nearly $1 trillion on a market basis, which more closely represents “market realities and system liabilities” than the rosier investment assumptions made by pension plans. That comes out to more than $76,000 per household.
Only part of that nearly $1 trillion liability is funded. PRI senior fellow Wayne Winegarden says “California’s unfunded liabilities are between $300 billion and $600 billion.” That gap will have to be closed somehow, likely through taxpayers’ “contributions.” They would be hit, according to Winegarden, with “an annual $28.3 billion net tax increase over the next 30 years,” the largest tax hike in California history. A tax increase of that magnitude would “cause California’s economy to be 21 percent smaller over the next 30 years compared to its current economic growth path due to the adverse impacts on economic growth,” he adds.
California’s future is indeed being consumed by the public employee pension crisis. Large-scale changes are need before the carcass has been picked clean.
Kerry Jackson is a fellow with the Center for California Reform at the Pacific Research Institute.