At the Jan. 24 meeting of the state Senate Budget Committee, Sen. Bill Emmerson, R-Redlands, began by pointing out, “The governor has identified $180 billion of unfunded retirement liabilities, and the pension changes that we made last year did nothing to address these pension liabilities.”
Days later, Legislative Analyst Mac Taylor gave a talk on state demographics and put up the sobering chart reproduced here. Fueled by dropping birth rates, the number of workers available to pay taxes and support the growing percentage of retired workers — specifically public retirees — is dwindling.
In an effort to stave off well-grounded criticism that politicians in Sacramento are unfit to handle any more of our tax dollars, last year they passed supremely lame “pension reform” that largely applies to public employees hired after Jan. 1, 2013. At a Jan. 30 hearing on the state of employee pensions, Anne Stausboll, CEO of the California Public Employees’ Retirement System, admitted that it will take decades for the “reform” to help close the gap between obligations and liabilities.
“That’s not something that’s going to be happening in a few years,” she said.
Instead, according to Stausboll, the plan is to “review our actuarial policies as well as the various assumptions — including the investment return assumption — to make sure those are taking the right level of risk. As we do that, it’s possible that the employer contributions will go up.”
The “employer,” by the way, is us.
CalPERS doesn’t have much of a choice but to re-examine its assumptions on investment returns. Its (laughable) 7.5 percent assumption is being challenged by Moody’s credit rating agency, which recently said it will evaluate public pensions using a 5.5 percent rate of return.
People today are more mobile than ever, and over the next decade, as “employer contributions” (read: taxes) go up and public benefits go down, there will be less of an incentive to stay in California. Then the retirees who remain can reminisce about the glory days when Gov. Jerry Brown said the budget was balanced and everything was going to be all right.
Melissa Griffin’s column runs each Thursday and Sunday. She also appears Mondays in “Mornings with Melissa” at 6:45 a.m. on KPIX (Ch. 5). Email her at firstname.lastname@example.org.