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I used to live in California. I like to joke (to keep from crying) that I left the political and fiscal mess of the formerly Golden State for the sunny uplands of Illinois. At least the streets get cleared of snow in Chicago, my new home town.
Anyway, my family left California after five years there knowing (1) it was not as awesome as most believe, and (2) that state is screwed. It has a level of dysfunctional politics that makes hopelessly corrupt Illinois look good. (Chicago is especially corrupt, but has some efficiency.)
But it’s the public pension system — the sort that Scott Walker was trying to rein in up in Wisconsin — that is the eternal screw for California. The state is already broke, and the economy doesn’t look like it’s gonna rev up any time soon to continue the papering-over of California’s fiscal mess — like Silicon Valley and the dot.com boom did in the 1990s and early 2000s.
King elaborates, writing about California’s public pension system:
California’s generous public-employee pensions yield awards that are, on average, more than three times the standard Social Security benefit. And given the earlier retirement age, workers will necessarily pay into the system over a shorter period of time. Understood this way, the ratio of workers to retirees would change from roughly two to one (40 years working, 20 years retired), to a more perilous one to one (30 years working, 30 years retired).
Apologists for California’s current public-pension schemes insist that there is no crisis, and that despite the financial collapse and late recession, future investment returns should easily cover the costs. But it’s hard to imagine stock market dividends alone funding California’s unfunded liability of more than $500 billion, let alone the $5 trillion in pension payouts we’re imagining. When more than 100 million people are withdrawing funds on that scale each year to fund their retirements, the market has too many sellers to permit meaningful rates of return.