Scott: California’s Pension Crisis

The unfunded liability of CalPRS, according to the Pension Institute at Stanford University is north of one trillion dollars.  Yet, Guv Newsom is claiming the State has a $75 billion “surplus”.  The unfunded liability of CalSTRS (teachers pensions) is north of $400 bill.  Last year city and county government played the stock mark, via CalPRS, like you play blackjack at a casino.  On total they bet $4.2 billion in newly issued bonds on the gamble of the stock market—if they fail, your taxes go up and pensions go down.

Watch the pension crisis, it could collapse the State budget when inflation kills the economy—and that has started.

California’s Pension Crisis

SACRAMENTO, CA – JULY 21: A sign stands in front of California Public Employees’ Retirement System building July 21, 2009 in Sacramento, California. CalPERS, the state’s public employees retirement fund, reported a loss of 23.4%, its largest annual loss. (Photo by Max Whittaker/Getty Images)

 

Tom Scott, Gold Country Media,  5/27/21 

In states with healthy, growing economies, government and the private sector are partners, not adversaries. The business community not only pays taxes to fund the core services of government, but private companies often actually perform those services themselves. Smart governments, including many localities in California, have identified certain government services that are best outsourced, saving taxpayer dollars and allowing the government to focus on areas it has unique competency.

In my previous role as California state director for the National Federation of Independent Businesses, I talked to small business owners across the state every day. California has long been known as the worst state for business. Chief Executive Magazine consistently ranks California as the worst state for doing business for a reason. High taxes, excessive regulations, and pro-plaintiffs’ courts all contribute to making California a state that many businesses are looking to escape.

A big part of the problem is California’s unwillingness to deal with structural issues such as public sector pensions. The California Public Employees Retirement System barely has two-thirds of the money needed to pay benefits to state and local workers. It is a ballooning crisis that lawmakers have failed to solve and the end result is higher taxes that kill jobs and depress wages.

Legislators continue to go to the well of raising taxes on the business to pay for rising pension costs instead of identifying the long-term solutions the state desperately needs.

Absent long-term solutions in Sacramento, there are ways to incrementally solve the pension crisis at the local level. Many communities have long had public/private partnerships that reduce pension obligations at the local level. One of the best examples of such a public/private partnership is the contracts municipalities have with EMS service companies. These successful arrangements ensure fast, reliable ambulance services for communities and do not increase local pension liabilities.

Unfortunately, efforts are underway to undermine these arrangements. Cities like Oxnard and Chula Vista are re-examining public-private partnerships within their own fire departments, seeking to sever agreements with private ambulance companies to provide emergency health services and bring back government-run ambulances.

Private ambulance companies do the job cheaper, faster, and more reliably. Despite what many detractors may say, these companies often use union labor; oddly enough an in-sourcing of these capabilities would be an attack on organized labor. Not something you often see politicians championing in California.

If California is going to overcome its massive pension crisis, it must not make the problem worse. Eliminating successful public/private partnerships and placing even more burdens on the state’s cash strapped pension system is only going to make the crisis worse than it already is.

The root cause of this in-sourcing trend, California’s unsustainable pension obligations, needs to be met head-on. It is not a small challenge that can be met with budgeting gimmicks and bigger, less efficient local governments. While California and its counties and municipalities grapple with this issue, they shouldn’t shoot themselves in the foot by making government services more expensive while harming access to health care.

Public-private partnerships such as the ones that exist for ambulance services provide a good foundation for the long-term solution we need to California’s pension crisis. We are not going to solve the pension crisis by making it worse. Ending public/private partnerships will keep California on the road to higher taxes and fewer jobs and that is a road we can no longer afford to be traveling.

Guest columnist Tom Scott is a 25-year resident of Folsom. He can be reached at [email protected]global.net.

About Stephen Frank

Stephen Frank is the publisher and editor of California Political News and Views. He speaks all over California and appears as a guest on several radio shows each week. He has also served as a guest host on radio talk shows. He is a fulltime political consultant.

Comments

  1. Rico Lagattuta says

    A misleading article is just as bad as an article filled with misinformation. Gavin Newsom has never stated that California is out of debt or is debt free. All he stated is that California has a Budget surplus of $75 Billion .CalPers shortfall is a totally different issue.

    • In other words Newsom lied (again). You have a budget surplus, or you don’t. CalPers is not a different issue. It’s part of the state’s overall budget. It’s much like a household claiming surplus by not paying their mortgage.

  2. Tracker 1 says

    It seems that the California Governor has no intention to address the CALPERS or STRS under funding. That basically says he will let them fail. By California law those two funds are backed by the State. There are tens of thousands of California State current and former employees that are dependent on the retirement plans controlled by the State government and badly mismanaged for decades. Making up a trillion dollars or 400 billion dollars of under funding is not going to happen. An example at the moment are those who chose the long term care option and are looking at an increase of about 75% in monthly premium over the next two years. That is an example of mismanagement by the State. Those who are covered under the PERS and STRS retirement plans can expect to see significant reductions in benefits. The required amount current employees and districts pay into the State fund have likely reached a maximum level so the retirement payout is where the money will come from. Do not expect the Federal government to bail out the State!!

Speak Your Mind

*