On May 28, in one of his final articles after 33 years and 9,000 columns at the Sacramento Bee, state political columnist Dan Walters opined in “Growing Retirement Costs Are Hitting New State Budget Hard” that although the 2017-18 budget proposed by Governor Jerry Brown references the large impact of pension liabilities, it still minimizes this impact.
Walters summarized how the proposed budget characterizes public pension liabilities. The budget states that California has $205.9 billion in unfunded liabilities and that this figure grew by $51 billion in the past year alone. It also provides that mandatory contributions to CalPERS are expected to nearly double from $5.8 billion in 2017-18 to $9.2 billion in 2023-24.
These figures are worrisome. Walters pointed out, however, that the projections are unrealistically low, as they are “based on CalPERS hitting an investment earnings benchmark which is probably too high after years of ‘poor investment returns.’”
Walters noted that CalSTRS also has run up huge unfunded liabilities, and that teachers’ pensions seriously impact the budget because the state provides about three-quarters of schools’ financing. The editorial pointed out that although the state budget increases the money going to schools, “a big chunk wouldn’t be paid until 2019, which could still force schools to cut other spending next year to pay for pensions.” Walters also stated that CalSTRS’s liabilities are expected to rise from $4.7 billion in 2017-18 to $7 billion by 2020-21, plus $2.5 billion for CalPERS.
Walters concluded: “Those are very big numbers, because it’s a very big problem.”
We in no way delight in being the bearer of bad news. However, we believe it is better to strive for transparency about present and predicted pension liabilities, so that public employers can more accurately plan their own budgets.
Nate Kowalski is Chair of the firm’s Public Entity Labor and Employment Practice Group. He is an accomplished litigator who represents employers in both the private and public sectors. Mr. Kowalski has litigated hundreds of ...
Jorge Luna has been practicing law since 1996 in a variety of areas, including employment, construction, business litigation, intellectual property and entertainment. For the past 12 years, Mr. Luna has focused his practice ...
Joshua Morrison represents California public school districts in all aspects of general education law. His areas of specialty practice include public employee discipline/dismissal, administrative hearings, matters before ...
Other AALRR Blogs
- “California Rule” Survives (For Now) — But “Airtime” Does Not
- Be Cautious About “DROP” Programs
- California Supreme Court Hears Cal Fire Oral Argument
- Amortization Period for New Debt Shortened to 20 Years
- New CalPERS Compensation Limits, Effective Immediately
- CalPERS Responds to Its Critics
- Senate Bill 525 Amends California Public Pension Laws
- New Stanford University Study Predicts Public Pensions Costs in California to Consume 14-17.5% of Operating Expenses by the Year 2030
- New Law Penalizes Employers Who Fail to Provide Information About Annuitants Working During Retirement
- Appellate Court Holds That MOU Does Not Provide Vested Interest in Retiree Medical Benefits