Friday, July 30, 2010
California Facing $500 billion in Unfunded Pension Debt
According to a study done by Stanford University's public policy program, California's real unfunded pension debt amounts to more than $500 billion, nearly eight times greater than officially reported.
Studies by Northwestern University and the University of Chicago reached similar conclusions.
These pension burdens are weighing heavily on the Golden State's budget.
This year, $5.5 billion was diverted from higher education, transit, parks and other programs in order to pay a fraction of current unfunded pension and healthcare promises.
Without reform, that figure is set to triple within 10 years. As it is, California's pension costs already rose 2,000% from 1999 to 2009.
Obviously, this is simply unsustainable. Other programs for the majority of Californians are already becoming unaffordable. Education, in particular, has taken a severe hit.
Existing pension costs are a ticking time bomb for the state because they amount to contractual promises that must be met.
Retirement and healthcare costs will weigh heavily on California for many years, even if future pensions are soon reformed. New employees may not receive the same rich guarantees as their predecessors, but the old obligations will remain crushing.
However, enacting necessary reforms will require taking on the powerful public employees' unions, who will wage war to protect their generous benefits.
Saving the state from these bloated pension costs will be an epic battle; the state's public employees have collective bargaining rights.
But legislators will have to engage that fight soon, otherwise the Golden State will be renamed the Red State due to all of its budgetary red ink.