California's 2000% Pension Spike


Steven Greenhut, author of our great February cover story on the "Class War" between public sector employees and the rest of us, had an equally blunt-spoken piece last week in the Wall Street Journal, entitled "Public Employee Unions Are Sinking California." Some numbers and verbiage that were new to me:

Approximately 85% of the state's 235,000 employees (not including higher education employees) are unionized. As the governor noted during his $83 billion budget roll-out, over the past decade pension costs for public employees increased 2,000%. State revenues increased only 24% over the same period. A Schwarzenegger adviser wrote in the San Jose Mercury News in the past few days that, "This year alone, $3 billion was diverted to pension costs from other programs." There are now more than 15,000 government retirees statewide who receive pensions that exceed $100,000 a year, according to the California Foundation for Fiscal Responsibility. […]

A 2008 state commission pegged California's unfunded pension liability at $63.5 billion, which will be amortized over several decades. That liability, released before the precipitous drop in stock-market and real-estate values, certainly will soar. […]

State Treasurer Bill Lockyer, another prominent liberal Democrat, told a legislative hearing in October that public employee pensions would "bankrupt" the state. And the chief actuary for the California Public Employees Retirement System has called the current pension situation "unsustainable."

This situation, which is playing out all over the country, is definitionally untenable: Something will have to give.

In related news, a cover story on California's "savage budget cuts" in The Nation, written by Inside Obama's Brain author Sasha Abramsky, does not contain the words "pension" or "retirement," and the only mention of "unions" comes in a protest-banner exhortation to "respect" them. As ever, a thick chunk of the California commentariat refuses to grapple with the zero-sum reality of pension spending crowding out favored social programs.

And as always, it's important to remember this salient fact: If states had limited their budget growth to the growth rates of inflation plus population during the salad days of 2002-2007, instead of jacking up spending by 80 percent in real terms, they would have been sitting on surpluses when the economic crisis hit, instead of scratching at the door of the federal government.

Greenhut link via Jonathan Adler over at Planet Volokh.