Golden State Better Be

[TeachOn]

This is very bad news. We used to laugh at those fellows with the "End is Nigh" placards: now not so much. Caifornia seems a long way off from here, but one wonders.

California Deficit Swells to $16 Billion, Governor Says (Update 1)
By Michael B. Marois - May 12, 2012 3:49 PM ET

California’s budget deficit has swelled to $16 billion after tax collections trailed projections amid the tepid economic recovery, Governor Jerry Brown said in a comment on his Twitter post.

The shortfall has widened from the $9.2 billion Brown estimated in January, after lawmakers resisted the Democrat’s call for cost cuts, the federal government blocked other reductions and April income-tax revenue missed budget forecasts by $2 billion. On May 14, he’s set to unveil a revised spending plan and to say how he would erase the gap.

Brown, 74, set out an initial budget in January with $92.6 billion in spending for fiscal 2013, which begins in July. That plan stripped more than $4 billion from health and welfare programs while relying on higher income and sales taxes. The levy increases will go before voters in November. If rejected, schools will lose $4.8 billion midway through the year.

[Mrs. K.]

According to this article from Bloomberg, the tax increase is needed to fund public pensions. http://www.bloomberg.com/news/2012-0...t-schools.html

That the pension fund is hurting is no secret; this was in the LA Times: The nation's second biggest public pension fund, which provides retirement benefits for almost half a million California teachers, faces a projected $64.5-billion shortfall over the next three decades.

Ed Derman, deputy chief executive of the California State Teachers' Retirement System, told reporters Tuesday that the $152-billion pension fund has only 69% of what it needs to meet future obligations.

Pension experts say an asset value equal to about 80% of future obligations is the minimum conservative funding level for a program such as CalSTRS.

To bring its program into balance, CalSTRS would need to boost the total contributions it receives from members, school districts and the state government 13% over the next 30 years, Derman said.

Getting those hikes would be difficult at best, Derman acknowledged, because any increases would need to be approved by the state Legislature.

Lawmakers are holding hearings on a proposal by Gov. Jerry Brown to cut the state's projected pension costs, which the governor and critics have called unsustainable.

The new investment and actuarial data will be presented to the CalSTRS board of directors on Thursday.

The pension fund, which is still recovering from steep losses during the recession of 2007-09, earned a 23% return on investments for the fiscal year that ended June 30. The fund's fiscal year-end return averaged 1.2% over the three years ending June 30, 3.8% over five years, 5.7% over 10 years and 8.1% over 20 years.

CalSTRS leaders realize that "we cannot reasonably expect to invest our way" to full funding, Derman said.

Politicians made unsustainable promises many years ago, and now the chickens are coming home to roost. It's an awful situation.

[HeatherY]

I'm a Californian. I really hate that every measure on our ballots is a bond. Eventually you have to pay for those bonds, and this is exactly what has happened. Sure, I like the idea of high speed rail and children's hospitals, but as a bond? And it doesn't matter which party is in office. CA loves its bonds.

[Rockguykev]

Is it too cynical to think these numbers were altered to make the tax increase more likely to pass? If so, call me too cynical. I'll actually give Brown some credit though. He has tried to cut at least a few things (which the CA judiciary reinstated because apparently they can do that...). You can't honestly say though he has taken this whole thing completely seriously.

We have become Greece here in California except that we're Greece that never votes for tax increases. If this passes in November it will be only because Brown managed to scare the people into doing so (or lie well enough to convince them it only affects "millionaires").