Because of those new standards and low investment returns, the state’s unfunded liabilities (including the University of California retirement system) soared by an astounding 22 percent since last year. But even this new estimate of $279 billion in liabilities is on the optimistic side. Some credible estimates pin California state and local governments’ pension liabilities at nearly $1 trillion, based on more realistic rate-of-return predictions.
As Calpensions explained, that $6 billion of borrowed money doubles the amount of general-fund dollars that the state is paying to deal with pension obligations. Meanwhile, as the state borrows money to pay that tab, it raises taxes to fund transportation. If Brown and the Legislature had trimmed pension costs, it would not have needed to raise gas taxes and the vehicle license fee. And the problem reverberates for local governments, too.
The latest example involves occupational-licensing reform. It’s one of those rare issues that should have widespread bipartisan support. Think tanks on the left and right agree that burdensome and costly rules for getting a license to perform certain jobs (barbers, makeup artists, locksmiths, speech pathologists, funeral directors, etc.) make it inordinately difficult to enter the job market, especially for people of modest means. . . An IJ study from 2010 found that California had the seventh-most burdensome licensing regulations in the nation. Our state requires licenses for 62 low- to moderate-income professions. Only a handful of those were the target of Senate Bill 247.
California school and community college districts are contributing $5.6 billion to CalSTRS and CalPERS during the current school year. These contributions will total $6.7 billion in the next school year, and, according to CPC’s analysis of actuarial projections, they will reach $11.3 billion in the 2022-2023 school year.
Gov. Jerry Brown and Democratic legislators have caused a stir with their plan to increase taxes to pay for the state’s unquestionably decrepit infrastructure of roads and bridges. Instead of thinking of this as a new transportation tax, however, Californians should see it as a pension tax, given the extra money plugs a hole caused by growing retirement payments to public employees. Consider this sobering news from the CalMatters’ Judy Lin in January: “New projections show the state’s annual bill for retirement obligations is expected to reach $11 billion by the time Brown leaves office in January 2019 – nearly double what it was eight years earlier.” That’s the state’s “annual bill,” i.e., the direct costs taken from the general-fund budget. That number doesn’t even include those “unfunded” pension liabilities that according to some estimates top $1 trillion. That’s more than double the $5.2 billion a year the Brown administration hopes to raise from a plan that would boost gas taxes by 12 cents a gallon, raise the vehicle-license fee by $25 to $175 a year (depending on the value of the vehicle), impose a $100 annual fee on electric cars because they don’t currently pay gas taxes and include a large hike on diesel fuel. Money is fungible, so if the state overspends on pensions, it has to make it up somewhere else.