The California Policy Center recently put out a good piece on the reality behind the debt obligations for our State. Read the full article here: Can California’s Economy Withstand $1.3 Trillion of Government Debt?
Because we are generous, and probably hate reading even more than you do, we went ahead and made a couple of graphs to sum up the article. But let’s set the stage first.
Let’s break California’s public debt into three categories: debt from bonds and loans, debt from unfunded pension obligations, and debt from other retirement benefits like retiree health insurance.
California’s official estimate of those three totaled to $832 billion, and was divided like so: But there’s a problem. The people who make these estimates are either idiots, or willfully lying to the public about the anticipated returns the assets funding the pension plans.
The California Policy Center reworked the numbers on unfunded pension liabilities with some more realistic anticipated rates of return, and came up with these numbers:
In case you’re counting, that jump (from $258 billion to $713 billion) takes the state debt to $1.29 trillion.
The main cause of this is that CALPERS, the agency responsible for making the initial idiotic projection, estimates their returns at 7.5%. The California Policy Center uses a number based on the Citigroup Pension Liability Index – the same numbers used by the Big Three credit rating groups like Moody’s. That number is 4.4%, and it makes all the difference.
We should point out that it’s not only ill-advised to use such a high-risk system, but is also probably illegal for a private entity to do. At the least, it would open up a corporation to lawsuits from shareholders, etc.
So, as an extension of our discussion last week about Fortuna Mayor Sue Long not having the faintest clue about how pension plans work, we also have this – state agencies that are deliberately misleading the public about the amount of debt we’re on the hook for. And public employee unions who are hell-bent on exacerbating the situation by demanding higher incomes and better benefits for public employees even though it will cripple the state, and eventually render the system unable to pay the members’ pensions. (Just remember – “Me too!” screws absolutely everyone else.)
We’ll come back with more this weekend once those graphs have really had a chance to burn into your brain.