03/28/2024

The dimensions of California’s pension crisis

CalPERS says that an uptick in 2017 earnings, to more than 11 percent, has raised its funding level to 71 percent. That’s obviously good news, but CalPERS’ own staff estimates that earnings over the next decade should barely average 6 percent a year, which, if true, would mean the system would either have to allow its funding level to decline or hit state and local government employers – and, of course, their taxpayers – even harder.

It’s a balancing act. CalPERS and the other systems are trying to avoid insolvency without driving their members over the fiscal cliff. Rising pension costs are driving many cities to ask voters for sales tax increases this year, but they won’t be telling those voters the truth about why new revenue is needed, fearing candor would spark a backlash.

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