Pension Crisis

Gov. Brown Budget Starts Tackling Pension Debts, but High-Speed Train Boondoggle Persists

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A bullet train in every pot!
Credit: Neon Tommy / photo on flickr

The latest revision (PDF) of California's proposed budget offers some sunbeams from Gov. Moonbeam for fiscal conservatives. Democrat Jerry Brown's latest proposal is to actually start paying down the state's massive public employee pension debts and avoid implementing new spending programs.

The result is a $156 billion spending plan that shows the state bringing in $2.4 billion more than expected, but then also having to deal with a 46 percent increase in Medi-Cal expenses because of new coverage due to the Affordable Care Act. Brown predicts these state healthcare costs to rise to $2.4 billion in the next two years, which is problematic because the additional revenue is predicted to be a one-time thing.

Probably the most important news in these parts is that Brown will finally work to address the state's massive pension liabilities rather than just talking about how the state needs to address its massive pension liabilities. He's focusing on the teachers and looking to get the pension fund fully funded in 30 years. The current pension liability is $74 billion. He proposes $450 million for next year to start eliminating the liabilities and requiring teachers and school districts to pay more into the pension funds as well. The problem with such a plan is, obviously, what happens once Brown isn't around anymore, assuming he is even able to get this proposal off the ground. Ultimately, the change could actually be disastrous to some school districts, Chris Reed at CalWatchdog notes, as schools already spend so much of their budgets on compensation, and he predicts a possibility of teachers actually paying less of their own pensions.

Brown notes that the state can't afford to take on pet spending projects, declining to spend $1 billion to launch a universal preschool program. But his godforsaken pet high-speed rail boondoggle is still there, waiting to suck down at least $68 billion. The latest fiscal news on the train has the price of just the first segment of construction already $1 billion higher than the initial estimate of $6 billion, a 15 percent increase. I really am not sure how I am supposed to feel if California's staggering pension obligations ultimately contribute to the death of the train project.

Regular Reason contributor Steven Greenhut analyzed Brown's budget over at the San Diego Union-Tribune. He described it as being about as fiscally responsible as you can get given the current power dynamics in California. Talk about damning with faint praise. Read Greenhut's analysis here.

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  1. I really am not sure how I am supposed to feel if California’s staggering pension obligations ultimately contribute to the death of the train project.

    Ambivalent?.like when a clown is brutally murdered.

    1. I remember a comic talking about his brand new Porsche. And his mother in law driving it over a cliff..

      1. That’s my kind of comedy.

    2. The death of the train project is what you call the silver lining on the dark cloud of the pension obligations.

  2. …”Brown notes that the state can’t afford to take on pet spending projects, declining to spend $1 billion to launch a universal preschool program. But his godforsaken pet high-speed rail boondoggle is still there, waiting to suck down at least $68 billion.”…

    I don’t know if moonbeam is dumb or deluded, but this comment is missing a couple of salient points:
    1) No way in hell $68Bn builds this disaster. The Bay Bridge finally managed to hit 10X budget, and that wasn’t happening out in the central valley with no one looking.
    Whatever they’re budgeting for the total cost of global warming? Figure numbers like that.
    2) This thing is a brand-new, statewide union hiring hall. If he whacks the mole of the teachers thievery, he’s just pushed another up through the table.

    1. 1) No way in hell $68Bn builds this disaster

      I agree. These legilators talk about budget overruns in the single digit percentage increases. I’ve been predicting the Big Dig II, The Big Dig Goes to Washington will be something like 5x over budget. They’re well on their way to proving me right.

      Because they were boring this tunnel underground, and they ran into dirt which totally like, blew everyone’s mind and shit.

  3. “…but High-Speed Train Boondoggle Persists”

    Priorities, people. Priorities.

  4. The only reason these progtards want a high speed train is because they pine for a Disneyesque parody of “Europe”

    1. As a CA resident, I’d have to say this comment hits pretty close to the bone, although I’m not sure many supporters of the train would even be consciously aware of it.

      1. In fact, when scads more people roll into Smug Central they will be bitching about all of the in-state touristas ruining their precious fucking San Francisco.

        It’ll be even worse than Google-bus. God how those fuckwads deserve it.

  5. The current pension liability is $74 billion. He proposes $450 million for next year to start eliminating the liabilities and requiring teachers and school districts to pay more into the pension funds as well.

    Cue NPR segment with teacher making $87,000 a year crying in her hands because she had planned to retire at 36 and now has to wait until she’s 39, and how this ruins her long-planned future life goals.

    1. Teachers in this state are so ridiculously overpaid. Fuck them and the six figure administrators. I mean, do we seriously need 6 assistant vice principles at elementary schools with a student body of 500 students.

      1. I’ve found something interesting, using my daughter’s elementary school as an anecdotal study of one, that back when I was a kid (when presumably teachers really did make $150 a week) that a school Principal would do his career at the school. You’d know the principal and he (or she) would be known for years, decades even.

        Now, the school principal seems to be a career stepping stone to something else- what that something else is, I don’t know. But my daughter’s old elementary school goes through principals every year to two years. In the time my daughter was there, I want to say they had four principals and they just got a new one. So from Kindergarten through 5th grade, something like 3 or 4 principals.

        And they don’t seem to leave under a cloud, they just seem to ‘move on’.

      2. I mean, do we seriously need 6 assistant vice principles at elementary schools with a student body of 500 students.

        That is a lot of vice for a small elementary school.

  6. I really am not sure how I am supposed to feel if California’s staggering pension obligations ultimately contribute to the death of the train project.

    That’s a myopic view. California’s (and other States’) staggering pension obligations will ultimately contribute to the death of government as we know it.

    The individual programs those governments are supposed to pursue are merely the organs inside the corpse.

    California’s staggering pensions will contribute to the death of basic services like fire, police, roadz, streetlights, and making sure the broad street pump isn’t full of cholera.

    Progressives suck so fucking hard that they’re willing to actually let those things that they claim to be protecting die for the one thing they claim they’re not– or don’t even acknowledge is a problem.

  7. The current pension liability is $74 billion.

    Serious question, Scott:

    Is that the unfunded liability, the current value of the shortfall between assets on hand and pension obligations? Or is that the current value of the pension obligations?

    It makes a big difference.

    The next question always needs to be: what is their deemed rate of return on assets? Administrators can and do understate their shortfall by using a higher rate of return. Anything over 6% is too high, IMO, although the states usually claim a 7 or 8% rate of return.

    1. According to Brown’s budget report, this is the unfunded liability, not the full value of the obligations. He says the current pension obligations are 67 percent funded.

      I don’t know off the top of my head what the rate of return is, but I believe it’s between 7 and 8 percent.

      1. “I don’t know off the top of my head what the rate of return is, but I believe it’s between 7 and 8 percent.”

        Is this what the fund is getting or what they hope to get to keep above water?

        1. CALPERS requires an 8% return under current assumptions. They’ve been getting far less.

          1. They should just pass a law that requires CALPERS to make at least 8%.

  8. Choo Choo !

  9. AAAALLLLLLL ABOARD!

  10. You fucking proles aren’t giving the governor enough of your money!

    1. As soon as my house sells he’ll be getting even less! The rest of you in this godfersaken hell-hole are on your own.

  11. Whatever the budget is now, it’s just been busted by what will surely be an insanely expensive fire season.

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