Tuesday, December 6, 2011

California's Public Pension Disaster

California has promised its public employees lavish pensions and retiree health benefits without setting aside nearly enough money to pay for those benefits. As a result, California already admits to a $75.5 billion shortfall in paying for these promises to public employees—$40.5 billion for the teachers’ retirement plan (California State Teachers’ Retirement System, or CalSTRS) and $35 billion for the California Public Employee Retirement System (CalPERS).

As the pension and health-care benefit crisis sweeps across the nation, some states are seriously dealing with these multibillion-dollar problems that threaten public services and treasuries. And other states remain in deep denial. California, to no one’s surprise, is moving stridently in the wrong direction. That continues a troubling trend that’s been building for years, one that has had a particularly harsh effect on black workers. While the private sector has been adding jobs since the end of 2009, more than half a million government positions have been lost since the recession.

A new estimate from the state’s public retirement system shows a change in benefits could prove costly.
Earlier this fall, lawmakers asked the retirement system to run some numbers.
They wanted to know how much it would cost employers- that are the state, cities and towns - if New Hampshire went from a defined benefit plan to a defined contribution plan.

Going from a system where the employers are responsible for guaranteed benefits, to one where employers only guarantee they pay a certain contribution.

Initial numbers from the retirement system’s actuarial firm are sobering. Read more....

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