November 18, 2016

SOMETHING THAT CAN’T GO ON FOREVER, WON’T: California’s Pension Woes Set To Deepen In 2017.

In 2015, California tried to reform CalPERS to address its shortfalls, but they didn’t do nearly enough. The system currently assumes annual returns of 7.5 percent, which is still far too optimistic. So CalPERS plans to revise its expectations downward, which would force governments to kick in more money to meet liabilities. Local government budgets, of course, are already stretched. It isn’t long before they’ll have to ask the state and, potentially, the federal government for a bailout. And with Republicans in control in Washington, it’s hard to imagine California getting any sympathy.

California’s state government has enjoyed finally being back in the black. But with all these pension liabilities coming due, it’s unclear how long the good times will last.

If you’re underfunding pension liabilities, you’re not really in the black.

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