CA Taxpayers owe Extra – $2.5T To State Pensions
By Doug Ross @ Journal 9-26-10
California’s Taxpayers Owe Public Sector Pensions $2.5 Trillion (yes, Trillion) More Than State Officials Admit.
David Roberts, writing at CalWatchdog, reports on the true scope of the financial disaster awaiting California’s taxpayers.
…the amount that taxpayers owe to provide pensions for local and state government employees is much larger – perhaps an extra $2.5 trillion – than government officials have let on, according to an economic advisor to Gov. Arnold Schwarzenegger…
How can this be? Doesn’t the state use traditional accounting methods and auditors? Dude, this is California — where Democrats have run wild for decades, enriching themselves at the public trough — so the answer is: no.
For example, an annual obligation of $30,000 for 25 years for a government employee’s pension is projected to cost the government $320,000, while the same $30,000/year, 25-year obligation in the form of a bond is projected to be $425,000…
“Two identical and unconditional obligations owed by the same government are valued at different amounts. The answer lies in the Alice in Wonderland world of government pension accounting that allows governments to hide liabilities.”
Well, that’s an unexpected development: the unholy alliance of Democrat legislators and public sector unions bosses have utterly and completely screwed California’s taxpayers.
…Because government officials are able to hide their future debt obligations in this way, they “are perversely incentivized to assume the highest rates of return in order to minimize reported liabilities, and then to swing for the fences in investing the capital of those funds in the hopes of actually achieving those returns, producing even more risk for the taxpayers who must make up for any pension fund shortfalls…”
In short, the Democrats who run the state and most municipalities are using every accounting gimmick in the book to set up a government-run Ponzi scheme that would make Bernie Madoff blush.
In 1999 the California Public Employees Retirement System (CalPERS) reported that its assets equaled 128 percent of its liabilities when in reality its assets totaled only 88 percent of liabilities…
Encouraged by that accounting, the state Legislature enacted a law that year boosting pension promises. The hidden cost from that boost has already hit $15 billion and will reach at least $150 billion for the state budget…
More generally, after having reported that liabilities were a fraction of assets and projecting that the state’s pension costs would total $5 billion over the succeeding 10 years, the state actually incurred $25 billion over that period.
Democrat candidate Jerry Brown, who served as California’s governor decades ago, has already admitted that a series of his earlier policy decisions were abysmal failures.
If California’s beleaguered taxpayers want to turn the page on the Democrats’ catastrophic policies, a vote for Meg Whitman would represent a start. The way California got into this mess in the first place is with failed leftist hacks like Jerry Brown.