The State of California’s public pension system is in the red, has been in the red, and–under the current system–will remain in the red. It’s just taken a while for people to admit it.
In 1999, the drastic expansion of California’s public pension employee benefits was driven by unions, workers, and government–under the naïve expectation of the constant growth of investments. Then the dot-com bubble burst in 2000. Then the stock market crashed last year.
CalPERS, California Public Employment Retirement System, estimates that this year alone, losses from the fund will be close to 30%, and Governor Arnold Schwarzenegger’s calls for action have been largely ignored, despite the fact that the fund is tens of billions of dollars underfunded. But maybe change is on the horizon.
Last week when the chief actuary of CalPERS, Ron Seeling, admitted that the system is unsustainable, as reported in the Sacramento Bee:
I don’t want to sugar-coat anything. . . We are facing decades without significant turnarounds in assets, decades of—what I myself, my personal words, nobody else’s—unsustainable pension costs.
As the public comes around to the idea that something will have to change, California—the state with the most union members in the country—will have a fight on its hands.
Last week, after echoing that Schwarzenegger might have been onto something, an LA Times editorial warned:
California deserves better than a fight between anti-government shouters branding public employees freeloaders and uncompromising union leaders ready to call out their troops to preserve the status quo.
But not all are ready to admit there is a problem. SEIU officials still find a way to blame other root causes—more convenient root causes that don’t involve unions.
Capitol Weekly quotes Terry Brennand, Senior Government Relations Advocate for the SEIU-CA, as sharing the following pearl of wisdom last week regarding the underfunded state pension system: “I actually think it is sustainable.” CW follows that Brennand think the basic problem is investment losses, not high benefit levels.
With wisdom like that, we can expect California’s pension system to stay right where it is– in the red.