Unfunded liabilities such as pensions for public retirees can become a strain on any city or state. In California, we are seeing a situation which should serve as a warning. Taxpayers are on the hook for massive amounts.
Yuichiro Kakutani reports at the Washington Free Beacon:
Calif. Taxpayers on Hook for Six-Figure Government PensionsNearly 80,000 Californians collected six-figure taxpayer-funded pensions in 2018, as retirement costs leave half the state’s cities at “high risk” of serious financial distress, according to an analysis.Transparent California, a free-market think tank, found that 6 percent of retired government workers collected more than $100,000 in 2018, an 85 percent jump since 2013. Those payouts represented 20 percent of the $51.7 billion in total pension payments. Taxpayers spent a record-high $40 billion to cover the costs of public sector retirees in 2018, the report also found.The median household income in California is $75,277. The six-figure payouts propel thousands of retirees into the top 38 percent of all earners in the state, according to census data. About 1.2 million people received pension checks in 2018, including a retired deputy police chief who collected nearly $1.5 million in 2018.
The burden of funding this is almost never fixed by cutting the size of government or programs, it is shifted to taxpayers. Also consider that in California, there is now a push to fund healthcare for illegal immigrants.
This is simply not sustainable. How is it any different from what happened in Greece a few years ago?
A recent editorial from the Orange County Register explained how tax increases are often sold to the public as safety issues, without mentioning pensions at all:
California’s 100k club grows as tax hikes mountAlmost 80,000 retired public employees in California are drawing pensions in excess of $100,000 per year, according to an analysis of 2018 pension payout data by Transparent California. The $100,000 club members collected 20 percent of the $51.7 billion in total public pension payments made last year in California.Both the number of six-figure pensions and the total payout were new record highs. If public pensions were a competitive sport, California’s trophies would weigh enough to sink the state…Why do voters approve tax increases? The ballot language of Measure C in South Pasadena was typical of the genre:“To maintain 9-1-1 emergency response times, including to home break-ins and thefts; neighborhood, school and park police patrols, fire/paramedic services, fire station operations, emergency preparedness; retain/attract local businesses; maintain streets/infrastructure; provide other general services and maintain City finances, shall the City of South Pasadena establish a 3/4¢ sales tax providing approximately $1,500,000 annually until ended by voters, all funds remaining in South Pasadena?”The word “pension” is never mentioned, because pension obligations have first call on the tax revenue already collected, pulling money away from priorities listed in the ballot language.
This is a ticking time bomb.
Other states are having similar issues, but California is in a category of its own just given its sheer size.
What happens when there is simply nothing left to tax?
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