Will Businesses Pay Unfunded Pension Debt?

Charles Crumpley
Editor and Publisher of the San Fernando Valley Business Journal

It sure seemed reassuring to hear that California expects to have a huge budget surplus this year – $21.5 billion – and even better that the new governor, Gavin Newsom, said he wants to put $3 billion extra into the California Public Employees Retirement System and almost that much into the state pension fund for teachers.
But what’s not so reassuring is that those amounts are piddling compared to what the state taxpayers may be on the hook for when it comes to the state’s unfunded pension liabilities.

California’s unfunded retirement liabilities are $257 billion, according to the state’s finance department. That’s alarming enough. But some think that applying a more businesslike standard to the shortfall yields a much steeper number.

The California Policy Center recently did an analysis of California’s debt. If you use Moody’s standards, the think tank said, you end up with total unfunded pension obligations of $846 billion.

Assuming a state population of 40 million, that means the total unfunded pension burden for every person in the state is more than $21,000. Got a family of four? That means your family’s share is equal to $84,000. Remember, that’s only for pensions for state public-sector workers, and just the unfunded portion at that – in other words, the part that may fall to taxpayers.

So why is a business publication writing about the state’s unfunded pension obligations? Because you – businesses and businesspeople of California – are the ones most likely to be targeted to pay that debt.

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