PEW Study Shows Vital California Services At Risk
A recent study released by the Pew Center On The States shows California, as well as most states, facing staggering budget problems as the result of their pension systems and health care benefits programs for state employees. The costs of these programs threaten to siphon off billions of dollars of state funds that might otherwise be spent on vital publicly funded health and social service programs.
According to the report, by the end of 2008, for all the states combined, the difference between pension obligations of those states, and what they had put aside to pay those obligations, was $1 trillion. For California alone the pension funding deficit was over $59 billion. That is the largest pension deficit of all the states.
The Pew study also found that health care and other non pension benefits for government employees are also putting other vital programs at risk. The study found that, among all states combined, the obligations for these other programs were almost half a trillion dollars more than the money states had put aside to pay these obligations. Only Alaska and Arizona had at least half of the amount needed to fund these obligations in reserve. Only Alaska, Oregon, Maine, and North Dakota had put aside the amounts recommended by their actuaries in 2008.
California was among the worst in this regard. Its 2008 unfunded liability for state retiree health care and other non pension benefits was over $62 billion. And, according to the Pew study, the funds put aside by California was equal to only .1% of the amount needed to fund this obligation.
Much of the problem results from the down turn in investments that these pension and health plans depend on to fund the plans. However, many states, including California, were contributing less to these programs than the actuaries recommended even before the economic down turn.
Part of the reason for that was that legislators and state administrations have been fighting the competing priorities of funding vital public services and covering the pension and health benefits of their public employees. However any objective assessment would have to also recognize that the benefits for public employees are much more generous than (i.e. more expensive than) those available to most people. For example, by most estimates, 46 million Americans have no health insurance at all.
The bottom line is that there will be increasing pressure on legislators to cover these deficits by contributing more general fund money to the state employee pension and health insurance programs. As things stand now, that would mean less money for other vital services.
Our California legislators are going to have to make some tough decisions to cover these funding gaps. At present their options for doing that appear to be as follows:
- Cut pensions and benefits for public employees
- Raise taxes
- Borrow money (which would increase the amount spent on bond interest payments)
- Cut vital public services
- A mix of all the above.
We will certainly be hearing more on these issues. It is important that we stay informed on the issues and press our legislators to do the right thing.
You may see a copy of the Pew report by directing your browser to the following address:
http://www.pewcenteronthestates.org/report_detail.aspx?id=56695
Boyce Hinman