Are Public Sector Workers Bankrupting California?

Are Public Sector Workers Bankrupting California?

Twenty-six states have chronically "underfunded" pension plans, leaving today's taxpayers to foot the bill for decades of greed and excess.

Brown is not alone in trying to reverse the government’s ever-increasing pension budget deficit.  Individual counties in the state are taking action, too.  Marin County passed a measure preventing state employees from claiming unused personal and sick leave and vacation time – which helps spike pension costs  A court ruled in 2016 that Marin County’s action was lawful.  However, the state Supreme Court plans to review that decision.

The legal issue in dispute is whether a state can adjust its pension benefits based on fluctuating economic conditions.  The unions say those commitments are sacrosanct – in fact, they claim it is illegal under the so-called “California rule” for them to be reduced.  Thankfully, many courts are beginning to find otherwise.

Another possible remedy for localities is to raise property taxes – not so easy in a state that led the property tax revolt.  However, some courts are beginning to order localities to raise property taxes just to meet their pension payments.  That means taxpayers may be forced to pay for the sweetheart deals made by profligate Democratic administrations for many decades to come.

How do California voters feel?  Divided, it seems.  Citizens groups have pushed every couple of years for a state ballot measure to remedy matters, but they rarely gather the number of signatures required.  The last time, in 2015, supporters withdrew a proposed measure when they became convinced that it would lose. They plan to try again next year.

Many people in a liberal state like California are reluctant to support a measure that targets trade unions and working people.  But unions like CSEA are not zealously promoting the interests of working people as a whole – just their own narrow membership.

Does that make public sector workers the “new welfare queens,” as some conservatives charge?  Not exactly, but privileged access to government coffers can cause even the humblest among us to succumb to selfishness and greed.

Right now, California’s pension funding crisis is only the most chronic and visible. In fact, some 26 states now have chronically “underfunded” pension plans, with only 15 making their annual pay-outs, plus debt repayments.  It remains to be seen who, if anyone, can muster the political will to resolve this crisis fairly.   Time – and money — are running out.

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  1. Stan says

    What a bunch of crap. Members pay into their own retirement plan. The only way the plan goes bankrupt is if every member retires at once…

    • Seesaw Junior says

      Totally 100% FALSE. It has nothing to do with when ONE, or everyone, retires, but it has to do with the funded level. Another trough feeder.

    • Tough Love says

      Yes Stan ….”you contribute” ………. but YOUR contributions (INCLUDING all the investment income earned on your contributions) is sufficient to buy between 10% and 20% of the total cost of a pension that in CA is ROUTINELY 3 to 6 times greater in value upon retirement than those granted comparable Private Sector workers who retire at the SAME age, with the SAME wages, and the SAME years of service.

      An you so no problem with that ???????????

    • Tom Green says

      What is bankrupting California is supporting countless illegal aliens with welfare, plus college tuition, and propping up colleges and universities with outrageous salaries that are not being earned. These schools prohibit free exchange of ideas and promote gender identity politics, ANTIFA thugs, and anti-American values, including sanctuary cities and even the entire sanctuary state. Insanity rules in California: it is a haven for left wing extremists, an entertainment industry that idolizes itself and its “stars,” and approves any kind of blasphemy, free abortion and open borders. Any kind of craziness is lauded and exalted. How soon can I leave?

  2. Stan says

    And you’re not even using the right CSEA in the photo! That’s the Civil Service Employee Association of NY you’re showing.

  3. Tough Love says

    Thank you, a well thought out commentary.

    For years the Public Sector Unions have “blamed” the pension mess on the lack of annual :full funding:. However, they never acknowledge that the annual calculation to determine the “full funding” contribution IS A FUNCTION OF (and varies in direct proportion to) the generosity of the pension’s formulas and provisions. Very rich formulas (e.g., 3% at 50 for Safety) and very generous provisions (a full/unrefuced retirement age of 50 for Safety workers and 55 for non-Safety and COLA increases after retirement) are VERY VERY costly and very difficult to fully fund.. The ROOT CAUSE of the pension mess is grossly excessive pension generosity, and the lack of full funding is not the CAUSE of the pension mess, but the CONSEQUENCES of that real ROOT CAUSE.

    One last thing, and quoting from your commentary…..

    “California’s pensions are financed in part through payroll taxes on public sector workers but the state government foots about 43% of the bill. In theory, the government also relies on annual returns from its stock investments to help meet its funding commitment to CalPERS. But since the 2007-2008 recession especially, those returns have slackened considerably. And yet the government has done little to lower its risk.”

    While investment income is indeed earned on Plan assets, there are only 2 REAL sources of income that pay for the pensions promised Public Sector workers, the employEEs and the employER (meaning the Taxpayers), and if you were to accumulate all of the typical employEE contributions (INCLUDING the investment return thereon), rarely would the accumulated sum upon retirement be sufficient to buy more than 10% to 20% of their VERY generous promised pensions. The 80% to 90% balance must come form Taxpayer contributions (including the investment earnings thereon).

    There is no 3-rd party contributor call “investment income”, and every $1 of investment income earned by Plan assets is a FOREGONE $1 of investment income that would have remained in the contributor’s pocket have the initial contribution not been made. ALL of the investment income is really ADDITIONAL contributions, split in proportion to the actual $$$ contributed from the employees and the Taxpayers.

    The statement ….. ….” the state government foots about 43% of the bill.” ………. is only accurate is you don’t look into the source of the principle that enabled ANY investment earning to arise.

    • Tough Love says

      The last sentence in my above comment got dropped………… here it is:

      When the share of investment earnings attributable to Taxpayer contributions (i.e. the FOREGONE investment earnings that would have remained in their pockets in the absence of the need to fund these absurdly generous Plans ….. perhaps to help fund their much SMALLER retirements) is properly attributed to THEM, the State’s (i.e., the Taxpayers’) share is not 43%, but 80% to 90% of total Plan costs.

    • Pete says

      Hey Toughie, I see you raced to put your insipid comments up on this opinion piece. LOL! As long as public employees have you as the opposition, they have nothing to fear!

  4. says

    “Defined retirement benefits” are creeping into budgets, especially when those benefits are underfunded. The unintended consequences are that it’s unfortunate that future generations,

    unable to vote today, will bear the costs of many enacted pension programs, entitlements and boondoggle projects, requiring them to pay higher taxes and work later into their lives to pay for these promises.

    The international business world is intelligent enough to know that DEFINED BENEFITS, neither capped nor precisely quantifiable in advance, financial disasters to any business, thus all businesses focus on the known, i.e., defined CONTRIBUTIONS alone.

    More than 62,000 retired California public workers earn at least six figures in annual retirement benefits.

    The CalPERS fund alone is more than $139 billion in the red. The East Bay Times reported last year that CalPERS’ retirement debt “averages out to $11,000 for every California household,” a relevant comparison since “taxpayers, not government workers, must make up the shortfall.”

    Since the public pension system is severely underfunded, city governments need to fund the retirements of former employees as the increasing pension costs will likely continue to crowd out resources that otherwise would go to public assistance, recreation, libraries, health, public works, and in some cases public safety.

    Stealing from the young who have no votes, but silently shoulder the costs and bear the burden of unfunded promises of these programs to enrich the old seems to describe the Governments expansion of entitlement benefits and other government services, along with the taxes young people will have to pay to support them, mostly to subsidize older Americans.

    Even before those young folks can vote, our Golden State schools are on track to force substantial budgetary cutbacks on core education spending, as public schools around California are bracing for a crisis driven by skyrocketing worker pension costs that are expected to force districts to divert billions of dollars.

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