If you really want to understand Californiaâs pension problems, read this article. It's long and it rambles a bit, but it lays out the economic picture.
California and Bust
http://www.vanityfair.com/business/features/2011/11/michael-lewis-201111
âIt shows that the cityâs [San Joseâs] pension costs when he first became interested in the subject were projected to run $73 million a year. This year they would be $245 million: pension and health-care costs of retired workers now are more than half the budget. In three yearsâ time pension costs alone would come to $400 million, though âif you were to adjust for real life expectancy it is more like $650 million.â Legally obliged to meet these costs, the city can respond only by cutting elsewhere. As a result, San Jose, once run by 7,450 city workers, was now being run by 5,400 city workers. The city was back to staffing levels of 1988, when it had a quarter of a million fewer residents⦠By 2014, Reed had calculated, a city of a million people, the 10th-largest city in the United States, would be serviced by 1,600 public workers.â
***********
In 1998, public employee retirement costs were 3% of the Los Angeles city budget. In 2008, public employee retirement costs were 8% of the Los Angeles city budget. In 2018, public employee retirement costs will consume almost 20% of the entire budget. In 2030, retirement costs will consume over 40% of the budget. Under California law, the taxpayers are on the hook for every penny. Many legal experts say thereâs no way out.
California and Bust
http://www.vanityfair.com/business/features/2011/11/michael-lewis-201111
âIt shows that the cityâs [San Joseâs] pension costs when he first became interested in the subject were projected to run $73 million a year. This year they would be $245 million: pension and health-care costs of retired workers now are more than half the budget. In three yearsâ time pension costs alone would come to $400 million, though âif you were to adjust for real life expectancy it is more like $650 million.â Legally obliged to meet these costs, the city can respond only by cutting elsewhere. As a result, San Jose, once run by 7,450 city workers, was now being run by 5,400 city workers. The city was back to staffing levels of 1988, when it had a quarter of a million fewer residents⦠By 2014, Reed had calculated, a city of a million people, the 10th-largest city in the United States, would be serviced by 1,600 public workers.â
***********
In 1998, public employee retirement costs were 3% of the Los Angeles city budget. In 2008, public employee retirement costs were 8% of the Los Angeles city budget. In 2018, public employee retirement costs will consume almost 20% of the entire budget. In 2030, retirement costs will consume over 40% of the budget. Under California law, the taxpayers are on the hook for every penny. Many legal experts say thereâs no way out.
