California pension liabilities skyrocket 22%

Breitbart reports that new accounting rules have required California to report that its unfunded pension liabilities have skyrocketed 22%:

The State of California is notorious for predicting spectacularly high pension investment returns, and then admitting lousy performance. But Governor Brown’s 2017-18 May Revised Budget admitted for the first time that the state’s and UC’s long‑term pension and healthcare liabilities jumped by $51 billion in the last year to $279 billion, “due to poor investment returns and the adoption of more realistic assumptions about future earnings.”

The Brown administration’s willingness to be more forthcoming with the cost of granting unions spectacular benefits was not voluntary. The Governmental Accounting Standards Board (GASB), which sets the accounting methodology for all government entities, issued Statement 85 in January 2016. The new mandate required pension plan audits to include postemployment benefits (OPEB) liabilities, such as retiree healthcare.
The State of California’s first GASB-compliant audited financial balance sheet revealed that unfunded retiree healthcare liabilities substantially exceed pension liabilities. The 2016 calculation of unfunded employee pension liability for the state was $59.141 billion, and $15.141 billion for the University of California. But the unfunded state retiree health liability is 36 percent greater, at $76.533 billion; and the UC unfunded retiree health liability is over 44 percent greater, at $21.719 billion.

The big jump in unfunded liabilities means a bigger burden on future California state budgets. The May Revised Budget reveals that the state’s contributions to California Public Employees’ Retirement System (CalPERS) “are on track to nearly double from $5.8 billion ($3.4 billion General Fund) in 2017‑18 to $9.2 billion ($5.3 billion General Fund) in 2023‑24.

State pension plans provide returns that are woefully under the 7.5% rate used to discount the value of their future pension obligations. For example, CalPERS earned just 0.6% during its last fiscal year. Further, CalPERS was only 65% funded as of June 30, 2016.

Between the high level of obligations, low returns, and unrealistic earnings expectations, pensioners and California taxpayers need to prepare for a bumpy ride over the next thirty years.