June 5, 2017

More Disquieting News About Public Pension Costs

BY: Nate Kowalski, Jorge Luna, Joshua Morrison

On May 28, in one of his final articles after 33 years and 9,000 columns at the Sacramento Bee, state political columnist Dan Walters opined in “Growing Retirement Costs Are Hitting New State Budget Hard” that although the 2017-18 budget proposed by Governor Jerry Brown references the large impact of pension liabilities, it still minimizes this impact.

Walters summarized how the proposed budget characterizes public pension liabilities. The budget states that California has $205.9 billion in unfunded liabilities and that this figure grew by $51 billion in the past year alone.  It also provides that mandatory contributions to CalPERS are expected to nearly double from $5.8 billion in 2017-18 to $9.2 billion in 2023-24.

These figures are worrisome. Walters pointed out, however, that the projections are unrealistically low, as they are “based on CalPERS hitting an investment earnings benchmark which is probably too high after years of ‘poor investment returns.’”

Walters noted that CalSTRS also has run up huge unfunded liabilities, and that teachers’ pensions seriously impact the budget because the state provides about three-quarters of schools’ financing. The editorial pointed out that although the state budget increases the money going to schools, “a big chunk wouldn’t be paid until 2019, which could still force schools to cut other spending next year to pay for pensions.” Walters also stated that CalSTRS’s liabilities are expected to rise from $4.7 billion in 2017-18 to $7 billion by 2020-21, plus $2.5 billion for CalPERS.

Walters concluded: “Those are very big numbers, because it’s a very big problem.”

Comment

We in no way delight in being the bearer of bad news. However, we believe it is better to strive for transparency about present and predicted pension liabilities, so that public employers can more accurately plan their own budgets.

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Attorney Bio(s)

nkowalski

Nate Kowalski

Partner

562-653-3200

nkowalski@aalrr.com

Nate Kowalski is a Partner in the Cerritos office and Chair of the firm’s Public Entity Labor and Employment Practice Group. He is an accomplished litigator who represents employers in both the private and public sectors. Mr. Kowalski has litigated hundreds of sensitive and complex labor and employment cases in state and federal courts and has achieved remarkable results for his clients in hearings, arbitrations, trials and appeals.

full bio

jluna

Jorge Luna

Partner

562-653-3200

jluna@aalrr.com

Jorge Luna is a partner in the Cerritos office of Atkinson, Andelson, Loya, Ruud & Romo. Mr. Luna has been practicing law since 1996 in a variety of areas, including employment, construction, business litigation, intellectual property and entertainment. For the past 12 years, Mr. Luna has focused his practice exclusively on employment matters, with an emphasis on litigation.

full bio

Joshua Morrison

Joshua Morrison

Senior Counsel

(562) 653-3200

jmorrison@aalrr.com

Joshua Morrison is a senior counsel in the Cerritos office of Atkinson, Andelson, Loya, Ruud & Romo. Mr. Morrison represents California public school districts in all aspects of general education law. His areas of specialty practice include public employee discipline/dismissal, administrative hearings, matters before the Public Employment Relations Board, petitions for writ of mandate, retirement health benefits, PERS/STRS, and school district audit appeals.

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