“If no corrective actions are taken, the combined liability of the three major state pension funds will be more than 5.5 times as large as total state tax revenue around 2012–2013. Moreover, the combined liability per each working-age adult in California is projected to more than triple, from $3,000+ in 2009 to over $10,000 in 2014.” —-Milken Institute
That was the numbing conclusion of a new study on the alarming state of California public pension crisis released by the Milken Institute. Addressing California’s Pension Shortfalls calls for immediate action to raise the retirement age and increase employee contributions while simultaneously shifting to a risk-sharing retirement plan which will lower the guaranteed level of pension.
Even the unions seem to recognize that the crisis is worsening and SEIU has agreed to most of the changes the Milken study recommended plus additional employee work furloughs in new contracts covering 132,000 employees or about 16% of the CalPERS covered employees. So there is a lot more negotiating progress that needs to be made and soon to get this problem under control.
The Millken study does through a detailed explanation of the problem include the use of faulty assumptions about investment income, bond discount rates and the State’s demographics concluding that many of the assumptions used are faulty or deliberately designed to mask the problem.
Whoever the new Governor of California is after the election this problem appears to be headed for the ACTION NEEDED NOW inbox.