California’s public pension crisis in a nutshell

The CalPERS board voted to change the period for recouping future investment losses from 30 years to 20 years. The bottom line is that it will require the state government and thousands of local government agencies and school districts to ramp up their mandatory contributions to the huge trust fund. . . . Officials fear that were it to experience another big investment loss, it would pass a point of no return and never be able to pay for pension promises. Protecting CalPERS, however, means getting more money from its client agencies, which could drive some of them into insolvency, as Hutchings said. Three California cities have gone bankrupt in recent years, in part because of their ever-increasing pension burdens, and payments have escalated sharply since then. So on one hand, CalPERS is doing what it has to do to remain financially solvent, but on the other hand its self-protective steps threaten local government solvency. That’s the crisis in a nutshell. One way out would be to modify benefits in some way. City officials, for instance, have suggested reducing automatic cost-of-living escalators in pensions over a certain mark, such as $100,000 a year. However, the CalPERS board, dominated by public employee organizations and sympathetic politicians, has spurned such pleas.