CalSTRS shows how to cut debt

by John Seiler | September 9, 2014 11:53 am

It turns out public pension debt can be reduced. And the California State Teachers’ Retirement System is showing how. CalPensions reports[1]:

CalSTRS was bracing to report the nation’s biggest pension debt under new government accounting rules that take effect this fiscal year — $167 billion, an amount so huge some thought it might increase the cost of issuing local school bonds.

But a long-sought rate increase approved by the Legislature and signed by Gov. Brown in the nick of time, a week before the current fiscal year began July 1, will allow CalSTRS to report a debt that is shrinking not ballooning.

Last week the CalSTRS board received a preliminary estimate from Milliman actuaries that drops the new debt report by nearly two-thirds to $59.9 billion. That’s less than the current unfunded liability under the old accounting rules, $73.7 billion.

That $59.9 billion still is huge, and must be reduced. But the method is clear: increase the rates for paying into the system. Whether that amount is paid for by the public employees themselves through reduced pay, or by local taxpayers through tax increases, is something to be negotiated among unions, administrators and taxpayers-voters.

But the conclusion is clear: If you give public-employees large pensions, then those pensions have to be paid for one way or another.

Alternatively, the generous pensions can be cut.

It sure also helps to have accurate accounting numbers instead of the guesstimates that have been out there for years.

Source URL: https://calwatchdog.com/2014/09/09/calstrs-shows-how-to-cut-debt/

---