Tags: California | pensions | debt | retirees

California Legislative Analyst Sees $340 Billion in Debt

Thursday, 08 May 2014 12:16 PM

California owes $340 billion in long-term debt including pension and health care costs for retirees, the state legislative analyst’s office said.

Half of those costs come from promised retirement benefits to public employees such as state workers, teachers and university staff, Legislative Analyst Mac Taylor said today in a report. He recommended that lawmakers make the $73.7 billion unfunded pension liability of the California State Teachers’ Retirement System a priority.

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“Addressing this difficult challenge, however, only grows more costly the longer we wait, meaning that the most important action the state can take to minimize costs is to act quickly to increase contributions to Calstrs,” Taylor said in the report.

The size of the long-term debt, about three times the state’s annual budget, contrasts with improvements in the state’s short-term fiscal health after voters approved temporary tax increases and the rebounding economy bolstered state coffers. Revenue for the most populous U.S. state is running $2 billion ahead of projections.

While the state has plans to pay $140 billion of the debt, about 60 percent, or $200 billion, remains unfunded, Taylor said in the report.

Higher Contributions

Democrats who control the California statehouse in January said they are working on legislation to shore up the pension fund that will include higher contributions from teachers, school districts and state taxpayers.

California now pays about 5 percent of teacher payroll into Calstrs. School districts provide 8.25 percent of payroll, while teachers and other employees give 8 percent of their pay. The total amounted to $6 billion in the last fiscal year.

Contributions would need to increase by another $5 billion or more annually by 2020 to keep the pension fund solvent, Taylor said.

California also owes $64.6 billion to pay health-care costs for current and future state worker retirees, Taylor said. Lawmakers and Governor Jerry Brown, a 76-year-old Democrat, should come up with a plan to pre-fund those costs, Taylor said. Such a plan would allow investment returns to cover a portion of the debt, he said.

Editor's Note: This Contract Can Help You Guarantee* Your Retirement Income

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California owes $340 billion in long-term debt including pension and health care costs for retirees, the state legislative analyst's office said.
California, pensions, debt, retirees
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2014-16-08
Thursday, 08 May 2014 12:16 PM
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