Sean King

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Knoxville, Tennessee, United States

Wednesday, January 27, 2010

California Dreamin'

WSJ:
Approximately 85% of the state's 235,000 employees (not including higher education employees) are unionized. As the governor noted during his $83 billion budget roll-out, over the past decade pension costs for public employees increased 2,000%. State revenues increased only 24% over the same period. A Schwarzenegger adviser wrote in the San Jose Mercury News in the past few days that, "This year alone, $3 billion was diverted to pension costs from other programs." There are now more than 15,000 government retirees statewide who receive pensions that exceed $100,000 a year, according to the California Foundation for Fiscal Responsibility.

Many of these retirees are former police officers, firefighters, and prison guards who can retire at age 50 with a pension that equals 90% of their final year's pay. The pensions for these (and all other retirees) increase each year with inflation and are guaranteed by taxpayers forever—regardless of what happens in the economy or whether the state's pensions funds have been fully funded (which they haven't been).

A 2008 state commission pegged California's unfunded pension liability at $63.5 billion, which will be amortized over several decades. That liability, released before the precipitous drop in stock-market and real-estate values, certainly will soar.


Unfortunately, the problems aren't limited to California. Many states, and even the federal government, labor under massive pension burdens that are only now coming to light (thanks in part to new accounting rules that actually require governments to...you know...account for the cost of the promises they make).

Fortunately, depressions have a way of wiping such slates clean. As a result, I would encourage public employees not to rely on these benefits.

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