Friday, October 15, 2010

The Disaster of California State Pensions

An interview with Robert C. Enlow, President and CEO of the Foundation for Educational Choice, about California's looming state pension crisis.

Trouble Brewing: The Disaster of California State Pensions

California has promised its public employees lavish pensions and retiree health benefits without setting aside nearly enough money to pay for those benefits. As a result, California already admits to a $75.5 billion shortfall in paying for these promises to public employees—$40.5 billion for the teachers’ retirement plan (California State Teachers’ Retirement System, or CalSTRS) and $35 billion for the California Public Employee Retirement System (CalPERS).

This shortfall has grown so large because elected officials preferred the hidden cost of higher retirement benefits to the visible cost of higher wages. For instance, a recent report from the Reason Foundation noted that thanks to a 1999 pension bill radically increasing benefits, “there are 9,111 state and local government retirees in California, such as police officers, firefighters and prison guards, who receive pensions of at least $100,000 a year (through CalPERS), and an additional 3,065 retired teachers and school administrators who receive pensions of over $100,000 a year (through CalSTRS).” As a California pension recipient told Forbes last year, “It’s just taxpayers’ money, so nobody cares.”

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