California

Unfunded Pensions Causing Concern In State Budget

Joshua Fimbres

Among the recent pressure on the California budget is the states’ obligations to its workers pensions. A recent Stanford Study commissioned by Governor Schwarzenegger shows that there is a $500 billion gap in state pension funds. To put that into perspective that is six times the size of the entire state budget. California is not isolated in that regard as total pension gaps across the fifty states amount to over $3 trillion. California is responsible for 2.6 million retirees from virtually every aspect of governance. Teachers, public university professors, various state agencies, and county employees are all beneficiaries of the state pension. Part of the severity of the situation is derived from the loss of funding from the UC system, which amounted to $109.7 billion. The burden caused by this pension deficit will make it radically more difficult to resolve the crisis in education, recreation, and transportation funding that are already on chopping block of the state budget. Without reform it is argued that the state pension could become unsustainable.

• State Pension: Salary granted to retirees of state and local government

• Argument for pensions: The state government has made a commitment to the pensions of employees who have served the state during their career. Robbing them of their pensions could be financially devastating for millions of retirees as well as unfair.
• Argument against pensions: The state government is being forced to scale back in several ways to control its large deficit and pensions are no exception to this rule, no matter how painful it may be to retirees.

Additional Reading

http://www.sacbee.com/2010/04/05/2657361/study-calif-pensions-underfunded.html