The biggest obstacle facing California’s recovery is a dysfunctional pension system created by politicians indebted to the public employee unions. The pension obligation is now $17 billion per year. California has 260,000 state employees and 38,000 are paid more than $100,000 per year. The University of California employs another 250,000 and 19,000 are paid over 100,000 annually. These generous salaries have been converted into lifetime annuities.
The Legislative Analyst’s Office estimates the unfunded pension obligations of California to total $237 billion. In an era of retiring baby-boomers, this trajectory is clearly unsustainable. With tax receipts down, huge pension obligations and a state budget deficit of $20 billion, the vast majority of municipalities in California are suffering deficits and facing the prospect of Chapter 9 municipal bankruptcy.
I see peasants with pitchforks. The public pension system will be changed. Because it has to be. Unions are great, so are nice pensions. But California can no longer afford such excessive pensions. Not when many are losing jobs and their own private pensions.
Going to have to go all marxist on you, Bob. Were it not for the last several decades’ enormous transfer of wealth from the working and middle class to the upper class, we wouldn’t be in this fix.
However, I’m not a marxist, but in reality a suckist. I’ve worked on union matters in California where the upper brass negotiated away the pay and benefits of younger union members in exchange for a 3% benefit for senior union members. In other words, in exchange for a pension formula of (A) number of years of service; times (B) average of top 3 years of pay; times (C) 3% instead of 2%, they sacrificed and screwed over their fellows with less power and knowledge. Gladly and willingly.
And now everyone is going to suffer.