California has 6 times more unfunded liabilities than debts just due to underfunded pension fund programs for state employees.
An independent analysis of California’s three big pension funds has found a hidden shortfall of more than half a trillion dollars, several times the amount reported by the funds and more than six times the value of the state’s outstanding bonds.
The Governator wants the California state legislature to face the problem. I'm pretty confident they won't. The crisis will get much larger.
The guy at Stanford who did the study says California can't hope to meet these obligations. So Cal state employees aren't going to get as rich of retirement benefits as they have been promised.
"What is so alarming is there is no way that the state will be able to meet these obligations," Nation tells HuffPost. "The odds are so heavily stacked against the state on this one. The question is how we dig out of this."
Can the state legislature cut retirement benefits for those already retired? For those about to retire?
In New Jersey 2 successive governors have underfunded the retirement systems even as the retirement systems have lost money. The state is strapped for cash. The public doesn't want program cuts to pay for the state workers.
In New Jersey, Republican Gov. Chris Christie followed steps of his predecessor to address a budget gap for the coming fiscal year by proposing last month to skip a $3 billion payment to the retirement systems for teachers, state employees and other public employees, valued at $66 billion as of June 30.
New Jersey's prior governor, Democrat Jon Corzine, mostly missed a $2.5 billion payment to the pension system and allowed cities and other local governments to pay only 50% of their share of the pension contribution. The fund is one of the most underfunded in the country.
For many years public employee unions have funded and supported politicians who enact big benefits increases for state and local government employees. Basically the public got screwed for the benefit of well organized employees. As the US economy performs poorly in the 2010s the conflict between government employees and tax payers is going to get very intense. Will the governments need to declare bankruptcy in order to escape these costs? That's what Vallejo California did. Could be a model for other governments.
A think tank with ties to public employee pensions has released a study of state and local pension plans that may underestimate the unfunded liability by trillions of dollars.
The Funding of State and Local Pensions: 2009-2013 released Thursday by the Center for State and Local Government Excellence studied 109 state and 17 local government pension plans and came up with an unfunded liability of about $1.2 trillion by 2013. Overall, plans will be at funding ratios of 66 percent to 72 percent.
That figure does not include medical benefits for retirees. So the true total is much larger.
“If we ran into a situation where one state got into trouble, they’d be bailed out six ways from Tuesday,” said Kenneth S. Rogoff, an economics professor at Harvard and a former research director of the International Monetary Fund. “But if we have a situation where there’s slow growth, and a bunch of cities and states are on the edge, like in Europe, we will have trouble.”
Unfortunately, TFD today is merely the proverbial calm before the storm. In a world of endless red ink and the coming debt tsunami, spending rather than taxing is the true measure of government's burden.
Explains the Tax Foundation: "Since 2008, however, deficits have been massive by any measure, and as a result Tax Freedom Day may give the impression that the burden of government is smaller than it really is. If the federal government were planning to collect enough in taxes during 2010 to finance all of its spending, it would have to collect about $1.3 trillion more, and Tax Freedom Day would arrive on May 17 instead of April 9 – adding an additional 38 days of work to the nation's work for government."
The 1990s were party time in the stock market. Lots of boats were lifted by the financial tides. But in the 2000s slower economic growth and the bursting of two financial bubbles brought many government financing problems to the surface. Those problems are going to get far larger than the American people think possible.
The 2010s will continue the same pattern of slow growth and worsening government finances. Expect higher taxes, wide ranging cuts in services, and fights over who pays and who gets less. The financial and demographic deterioration of America is going to make the politics very bitter and angry.
|Share |||By Randall Parker at 2010 April 11 12:04 AM Economics Sovereign Crises|