County and State pension shortfalls are getting worse rather than better.
We hate to play the part of the Scrooge this holiday season, but there have been two recent developments in public finances that have not received the media attention they deserve given the negative impact they will have on Santa Barbara families in the years ahead.
First, as we have recently highlighted, the County has more than doubled its pension contributions to its retired employees over the past decade. This spike in pension costs has led to decreased spending in other areas (e.g., parks, roads, and infrastructure), which has negatively impacted the quality of life in our County. A reasonable person might wonder whether we at least have a fully-funded pension scheme to go with our decaying infrastructure. The answer, sadly, is “no.” The County’s unfunded pension liability now exceeds $1 Billion. This means that the County will be forced to increase its already astronomical pension contributions in the years ahead and pay for these increased costs via significant spending cuts in other areas – areas that could soon include “sacred cows” such as social services and law enforcement. “Bah humbug!”
Second, the news is no better at the State level. As we have graphically illustrated, the dramatic rise in State pension spending has been matched by the rise in tuition and fees in the UC and Cal State Systems. This already negative trend is about to get even worse. CalPERS – the State’s largest public employee pension – is seeking to decrease its investment rate of return. This means that its existing funding shortfall, which is already enormous, is going to grow substantially. As a result, the State will be forced to increase its contributions to help offset this shortfall. Where will the State find this money? In the higher education budget, of course. Merry Christmas, present and future UC and Cal State students and your families.
What can you do about these two lumps of coal in your stocking? How about making a New Year’s Resolution to pay closer attention to the sad state of our public finances and hold your elected officials accountable for the choices that negatively affect younger Santa Barbarans?