California’s Ticking Pension Bomb

Facing a budget deficit of at least $20 billion, California’s lawmakers face a deluge of problems.  One of the largest is undoubted the state’s unfunded pension liabilities of California’s state and local governments which exceed $700 billion.

The amount the state spends on the worker-retirement system has increased by 2,000 percent in the past decade. This year alone, the state will spend $3.3 billion on pensions and other retirement benefits for government workers. Conservative estimates peg the system’s unfunded liability at $182 billion. This means the average household in California is on the hook for nearly $15,000 unless bold reforms are put in place.

During the last decade, California state government payments for retirement benefits have grown at an alarming and unsustainable rate, exceeding $5 billion a year, more than state support for the entire UC system. These huge and growing slices of the budget pie are needed to pay for average state retirement packages now valued at more than $1.2 million. The taxpayers who pay for those retirement benefits have an average of $60,000 saved for their own retirement.

Marcia Fritz, president of the California Foundation for Fiscal Responsibility notes the following:

With the unfunded pension liabilities of California’s state and local governments exceeding $700 billion, some state leaders now admit we cannot fix our budgets without reducing public employee retirement benefits. Near the end of his inaugural remarks, the governor said, “We will also have to look at our system of pensions and how to ensure that they are transparent, actuarially sound and fair — fair to the workers and fair to the taxpayers.”

During the last decade, California state government payments for retirement benefits have grown at an alarming and unsustainable rate, exceeding $5 billion a year, more than state support for the entire UC system. These huge and growing slices of the budget pie are needed to pay for average state retirement packages now valued at more than $1.2 million. The taxpayers who pay for those retirement benefits have an average of $60,000 saved for their own retirement.

Read her full Op-Ed in the LA Times HERE.

It’s worth noting that in August of 2010, a new academic study showed that not only is the total gap between the pensions that state governments have promised to pay their employees and the available resources much larger than previous estimates, but that gap cannot be closed with easy changes to those promises.

Enter the following illustration. If a picture is worth a thousand words, then this video from Reason.TV may be worth Trillions….

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