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Tuesday, October 18, 2011

California Teachers' Pension System Gets Good News and Bad News. The Good: It's Not $50B In the Hole. The Bad: It's Actually $150B.

Looks like generally accepted accounting principles are anathema to Democrats. But we already knew that.

The California State Teachers' Retirement System already faces a funding gap of $56 billion – the difference between the money it expects to have on hand over the next 30 years and what it will need to pay out in benefits during the same period.

The [GASB or Governmental Accounting Standards Board] proposal would triple the gap – on paper – to around $150 billion...

Right now, funds base their calculation on a forecast of how their investments will do. CalSTRS, for instance, says it will earn an average 7.75 percent a year on stocks, bonds and other investments...

...But because public pensions are guaranteed by taxpayers, conservatives and some academics contend pension funds should use a rate comparable to a super-safe investment like Treasury bills – something on the order of 4 percent.

The state teachers' pension system is just one of several immense public pension liabilities facing California's taxpayers. A 2010 Stanford University study put the state's combined public pension liabilities at well over half a trillion dollars.

As you might expect in the battle between sensible fiscal policy and Democrats, Governor Moonbeam is backing -- that's right -- the unions, not the taxpayers:

The Los Angeles Times summarized the Brown signing and veto flurry with this headline: “Gov. Jerry Brown is giving unions most of what they seek.” As the news story reported, “When the dust settled on Gov. Jerry Brown’s first legislative session in nearly three decades, no group had won more than organized labor, which heralded its largest string of victories in nearly a decade.” Union leaders were crowing with delight.

For instance, the governor signed a bill that makes it nearly impossible for municipalities to declare bankruptcy, forcing them instead to go through a mediation process that is dominated by union supporters who would oppose bankruptcy at all costs. Salaries and benefits are consuming such a large portion of city budgets that officials have no choice but to shut down parks and lay off workers.

The unions won’t budge on benefits, so their goal is to make it impossible to abrogate those overly generous union contracts that are the source of the problem.

Isn't letting Democrats run wild in your state fun?

Of course, it's not much fun if you're a beleaguered taxpayer in California. That breed of productive citizen is an endangered species, what with all of the easy access to welfare, open borders and millions of pages of regulations.


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