Thanks to new accounting standards, California’s state and local governments are being forced to acknowledge tens of billions of dollars in previously obscure debt for unfunded pension liabilities.
The Governmental Accounting Standards Board says that “unfunded actuarial accrued liabilities” should be listed on balance sheets along with the more traditional debts.
As those revised balance sheets began to emerge this year, they revealed some hefty numbers – such as Los Angeles County’s $8 billion-plus unfunded pension debt.
State Sen. John Moorlach, R-Costa Mesa, has been keeping a running tab and says that in just nine large counties, including Los Angeles, total pension debts top $20 billion.
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The state government’s balance sheet, which will be released soon, is likely to reveal some particularly big numbers.
A recent report from the state controller pegs “net pension liability” for the state’s public safety and “miscellaneous” employees for the 2012-14 fiscal year at $34 billion on $128.7 billion in pension obligations.
To put it another way, it’s a 26 percent shortfall, and that assumes the state will see a 7.65 percent investment return, which many authorities say is unrealistically high. If earnings are just 1 percentage point lower, the debt balloons to more than $50 billion.
There is one notable, seemingly unlikely, exception to California’s heavy public pension debts – the city of Fresno.
Transparent California, a think tank that tracks fiscal data for state and local governments, declares that Fresno’s pension system “is the only public pension program in California – and one of only a few in the United States – that has a surplus instead of unfunded pension liabilities.”
While Fresno’s pension benefits are still higher than those in local private employment, “they are considerably less inflated than any other pension system in California. They have a surplus, and that’s so different than anybody else.”
Wilshire Consulting, which advises public pension funds, reported last year that Fresno was one of only seven fully funded plans in North America.
The Transparent California report compares the city’s pension situation to that of Fresno County, which has a $980 million unfunded liability. The city’s pension benefits are markedly lower than those of the county. The city’s average nonsafety pension is $39,644 for a retiree with at least 30 years of service while the county’s average is $61,500.
That benefit gap manifests itself in an even wider disparity in costs. The city is paying an average of 16 percent of payroll into its pension fund, while the county is paying 52 percent, Transparent California said.
Robert Theller, Fresno’s pension administrator, told The Fresno Bee that the unusually healthy condition of its pension fund results from a decided effort by city officials and its unions to reach “fair compromises” that keeps costs in check, describing it as “a good balancing act.”
Perhaps California politicians should make educational pilgrimages to Fresno before they are consumed by pension debts that already have been major factors in the bankruptcies of three cities.