2009 August 20 Thursday
California State Pension Costs Not Sustainable

The California Public Employees Retirement System does not have enough money to meet its future obligations.

The CalPERS chief actuary says pension costs are "unsustainable," and the giant public employee pension system plans to meet with stakeholders to discuss the issue.

"I don't want to sugarcoat anything," Ron Seeling, the CalPERS chief actuary said as he neared the end of his comments. "We are facing decades without significant turnarounds in assets, decades of -- what I, my personal words, nobody else's -- unsustainable pension costs of between 25 percent of pay for a miscellaneous plan and 40 to 50 percent of pay for a safety plan (police and firefighters) ... unsustainable pension costs. We've got to find some other solutions."

The unions for California state and local government employees have gotten themselves such rich deals that the state is headed for an even bigger financial crisis than it is already in. The next generation is going to be less skilled and less productive. They won't earn as much and they'll demand more from government (e.g. more subsidized health care). The result will be a fiscal disaster.

Share |      By Randall Parker at 2009 August 20 11:16 PM  Economics Squanderville Thriftville


Comments
James Bowery said at August 21, 2009 5:09 AM:

Confiscate the properties of everyone who employed illegals to pay for deportations and temporary shortfalls.

Daniel said at August 21, 2009 6:39 AM:

Good news for hedge funds and private equity. Desperate pension fund officials will turn to them, still believing the crap that the HF and PE bandits in toto can beat the averages. Can't be done. Outstanding returns are just an illusion created by massive and reckless leverage. No leverage, no outstanding returns. There are only so many Warren Buffets and Jim Simons. Without massive, reckless leverage there are just not that many opportunities to make lots of money in the markets.

Well maybe there will be no reform on Wall street and the FED/SEC/FINRA etc...will still allow 30-40 to 1 leverage. It's the only game they know. Wall street has lost sight of the idea of modest but steady profit. Massive leverage is the only game in town. Great, another crash - worse than the last - in 4-5 years.

In any case, the taxpayer is doomed, unless we allow the state to go into bankruptcy, which is the better option.

Commodore said at August 21, 2009 11:59 AM:

Um, why the future tense? What's with the "will be a fiscal disaster"? It is currently a fiscal disaster. The state is broke already.

Randall Parker said at August 21, 2009 6:59 PM:

Commodore,

Currently the state is broke at a level where it can partially paper over the situation with accounting gimmicks. This is not enough to cause a full crisis. The real disaster hits with full force when the accounting gimmicks can't work any longer.

Really, the big disaster is still to come. More public union workers retire. More NAMs demand more services for very little tax dollars in return. Older white middle class retire or leave the state. Vallejo California's bankruptcy is a scene of coming attractions.

Daniel,

Peak Oil will cause even bigger crashes. See James Hamilton's paper Causes and Consequences of the Oil Shock of 2007-2008. We are going to experience a series of oil price shocks.

averros said at August 23, 2009 1:30 AM:

> More public union workers retire

It would be fitting for them to get rewarded according to their faith. They spent their lives gorging up on the loot they extracted from productive people. I'd love to see them queueing up for free soup. May be then they will come to see why theft is bad.


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