Why CA is so screwed up, in a nutshell

March 31, 2013

By Chris Reed

So CalPERS’ actuary, in a fit of unusual honesty, says the pension giant’s finances are in bad shape in the long run and need to be firmed up. But Alan Milligan realizes that asking his labor-dominated board of directors to have public employees pay more toward pension costs is a nonstarter. So what does he do? Daniel Borenstein has the details:

“He told the board that CalPERS needs more taxpayer money than previously thought from state and local governments and voiced concern about ‘slow progress toward full funding.’ CalPERS, at last accounting, had about 74 percent of the funds it should.

“To understand his proposed rate increase, consider pension costs for the California Highway Patrol. The state is already expected to pay 33 cents for every dollar of payroll in fiscal year 2014-15, and 39 cents by 2018-19.

“Under Milligan’s proposal, the rate would reach 44 cents. That’s an overall 33 percent increase over the five-year period … “

So CalPERS’ actuary wants to firm up CalPERS’ long-term stability by socking taxpayers, and what is the expected reaction from unions?

“Labor representatives will protest the higher rates, even though Milligan’s proposal does not require employees to pay more — and even though it will make their pensions more secure. The problem for them is that employers would have less money for salaries.”

Feel free to scream or cry or laugh or do all three. CalPERS’ board is hostile to having to properly fund pensions because then there would be “less money for salaries.”

If you wanted one factoid to explain why California is so screwed up, that one is tough to beat.