Fresno Bee: With no thought to long-term financial consequences, California politicians, both state and local, have saddled taxpayers with hundreds of billions of dollars in debt for pensions and retiree health care.No one truly knows the extent of what are called “unfunded liabilities,” because official estimates of the debts, around $200 billion, assume pension trust funds will achieve earnings that are likely unrealistic. Meanwhile, almost nothing is being put aside for rapidly increasing health care obligations.
In a rational world, the situation would demand tough, even painful, steps to close the funding gaps by modifying benefits and/or increasing “contributions” – a term of art – from taxpayers or employees themselves.
Recently, there have been a few baby steps in that direction, such as a new plan to slowly close the teacher pension gap.
However, retiree benefit liabilities continue to increase and the bankruptcy of three cities, in large measure because of unsustainable pension costs, have underscored the looming problem.
The dynamics that created the problem – expedient actions by politicians, pressured by powerful unions, to fatten benefits without steps to pay for them – make decisive action unlikely, as demonstrated by the collapse of the latest attempt at a big pension fix.
The legislature failed to prepare, and California will be burned this 2016 recession.
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