California's Death Spiral

Who's this going to be more of a disaster for - the employees who cannot possibly get what they've been promised, or the citizenry who's government will be bankrupted for trying?  I say again - it is a moral abomination for politicians to buy off large sections of a constituency by promising a retirement that cannot be estimated, likely cannot be paid, and will wreck the economy for the citizenry.  The only ones unhurt in the process are the politicians making the unsustainable promises.


"A study by Stanford University's Institute for Economic Policy Research(PDF) finds that California's fiscal problems go well beyond itscatastrophic budget deficit, which today stands at roughly $20 billion.

The state's biggest public pension funds -- those of the California Public Employees' Retirement System (CalPERS), the California State Teachers' Retirement System (CalSTRS) and the University of California Retirement System (UCRS) -- are in a lot deeper trouble than they've been letting on.

What's most disturbing is the lack of transparency on the part of the pension funds, as they have reportedly overstated their financial health as a matter of course.

...we estimate the combined funding shortfall of CalPERS, CalSTRS, and UCRS prior to the 2008/2009 recession at $425.2 billion... At the time of this writing, the funds have not released more recent financial reports, but due to the previously mentioned $109.7 billion loss the three funds collectively sustained, we estimate the current shortfall at more than half a trillion dollars.

That figure represents six times the amount of the total California state budget.

The study points out that the huge number of baby-boomers, whose retirements approach by the day, translates to a potential disaster in only a few years.

The chief actuary for CalPERS says the current pension situation is "unsustainable". And the state treasurer, Bill Locke, believes that without reform, these pensions will bankrupt the entire state."
http://directorblue.blogspot.com/2010/04/oops-californias-public-pension-funds.html