Orange County Employment Lawyers Blog
Funding and maintaining pension programs has become a serious problem for public employers across the nation. The bankrupt city of Detroit made headlines in 2014 when it settled with its underfunded public pension fund, and drastically reduced benefits to thousands of former city employees. The New York Times reports that the presiding bankruptcy judge called the deal “miraculous”. Now, the ugly reality of underfunded public pension programs has hit California as well.
The Mercury News reports California’s new state budget projects nearly $206 billion in “unfunded liabilities for the state’s two public pension systems.” What this means is that former state employees are entitled to $206 billion of benefits that the state simply cannot pay. CalPERS, the state employee retirement fund, manages close to $330 billion in assets. It is the largest public pension fund in the nation. And yet, it is only funded at approximately 65 percent of the total amount of its obligations to former state employees.
Nearly half of this $206 billion deficit has been added in just the past eight years. The exponential nature of these retirement benefit payments have turned the underfunding into financial time bomb. Unfortunately, public pension funding is not an easy issue for state politicians to tackle. Budget cuts, increased taxes, and reallocation of limited financial resources are unpopular measures which can wait until someone else takes office. But this waiting is exactly what caused the crisis that California now faces. Continue Reading ›