The numbers are only small on an actuarial basis which assumes positive things about the future like: the number of years employees are likely to keep working, the rate at which salaries are expected to increase, the rate of return on plan assets, the discount rate on future benefits.
When conditions are bad, you have to switch to the market basis.
And yes, sorry, technically I did lump in other unfunded liabilities (like bonds) in my calculation, but the number does indeed top $1T and California does its best to ignore these liabilities in their budgeting.
The number only reaches $1 trillion when you're talking about the entirety of pension liabilities, not unfunded liabilities. The entire liability is $1.05 trillion.
To put this in perspective, even if you assume zero investment returns, that works out to $35 billion/year over 30 years. The California 2019 budget was $215 billion.
Pension liabilities are a BFD, but I don't think it's fair to say the state is ignoring it. The state is actively pre-paying its obligations.
is this liability growing over the years or shrinking? Why do you expect that it's going to shrink at least 35 billion/year over the next 30 years? At some point every debt has either to be paid by the debtor or to be "forgiven" at the expense of someone else's livelihood/savings.
I don't think the liabilities are going to shrink on their own, I'm just trying to put the total cost in perspective.
You see a lot of people talk about the unfunded pension liabilities in apocalyptic terms. And when you hear figures in the hundreds of billions, or trillions of dollars, it sounds insurmountable. It sounds like a bomb waiting to go off that no one is dealing with.
But it isn't. The State is currently over-paying its required contributions. The State is not ignoring the problem. This thread spawned out of the assertion that California's budget is a mess. It started with a discussion of the 2020 budget deficit, and then spiraled into whether the pre-pandemic budget was a fiction which ignores public pensions. My assertion is that the budget was not ignoring the problem, the 2019 budget was funding pension liabilities at a level sufficient to dig out from the hole we are in over the next three decades.
It's also important to point out that the State of California is not the only entity required to fund the shortfall in CalPERS and CalSTRS. The State's liability in CalPERS is about $60 billion. The remaining $70 billion is owed by localities and other special districts.
None of this is meant to claim that the problem is not real. California is going to have to pay an awful lot of money for the next several decades. But that is an awfully long time horizon, with room for an awful lot of economic growth, and if we continue to prudently make payments towards the liabilities each year, it's not apocalyptic at all.
Importantly, the liabilities are owed over a long time horizon, and they don't scale with economic growth, or population growth. They are static. Meanwhile, in the past 30 years, California's real GDP has increased by a bit over 100%. Thirty years from now, it's entirely possible we'll have 2x the 2020 dollars available to pay the liability.
Pension liabilities are just a right wing talking point, which shifted from "budget deficits" when California started running huge surpluses and rainy day budgets
Pension liabilities and the government mismanagement surrounding the fund was a claim charged at the State of New Jersey from the left while Republican Governors Christine Todd Whitman and Donald DiFrancesco ran the state.
Then again with Jim McGreevey (Democrat) from the right.
It's a very bipartisan issue and both parties have fucked it all to hell.
The numbers are only small on an actuarial basis which assumes positive things about the future like: the number of years employees are likely to keep working, the rate at which salaries are expected to increase, the rate of return on plan assets, the discount rate on future benefits.
When conditions are bad, you have to switch to the market basis.
https://www.pensiontracker.org/ https://www.ocregister.com/2019/09/24/californias-pension-de... https://calmatters.org/commentary/dan-walters/2020/08/califo...
And yes, sorry, technically I did lump in other unfunded liabilities (like bonds) in my calculation, but the number does indeed top $1T and California does its best to ignore these liabilities in their budgeting.