Unfunded liabilities huge and growing; officials seek solutions
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NORTH BAY – Local, state and federal governments have unfunded pensions coming due in the trillions dollars, said Joe Nation, former state Assemblyman and Director of Graduate Public Policy Practicum at Stanford University at the annual Sonoma State University Economic Outlook conference.
“CalPERS is $102 billion in the red,” he told the Feb. 24 conference attended by about 250 people.
In fact, even if things go exactly to current plans, there is only 25 percent chance that CalPERS will meet its obligations to retirees, Mr. Nation’s studies have found.
“It is not a Marin problem, a Sonoma problem, a CalPERS problem, a California problem, it is a problem across the country. If you total up these unfunded liabilities across the country they probably add up between $3 trillion and $5 trillion.”
He identified three things that can be done to restore pension health.
First, is to increase contributions.
Second, he said, is to reduce benefits.
“If someone is retired, give it to them,” he said. But if someone is 15 years into a 30 year career, I think you need to put it on the table.”
The third what he called a “gamble,” that is, issue bonds with the hope of covering future liabilities. Mr. Nation used a video cartoon prepared by Bill Sharpe, the Nobel Prize winner in economics in 1990 and former Stanford professor, to drive home the risks related to pension obligation bonds.
(To see the video, go to www.xtranormal.com/watch/7921353/)
The conference was held at the Sheraton Sonoma County hotel in Petaluma on Feb. 24.
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Dr. Robert Eyler, professor and chair of the Economics Department at Sonoma State University, and director of the SSU Center for Regional Economic Analysis, started the morning off with an economic outlook presentation with some “actually decent news today, believe it or not.”
He discussed the elements of recovery and the challenges and opportunities that California faces. Labor markets are the key to a permanent recovery, he said.
Brian Sobel, principal consultant for Sobel Communications of Petaluma, gave an overview of the local, state and national political climate coming into the year.
Then Veronica Ferguson, Nancy Watt and Matthew Hymel, the county administrators of Sonoma, Napa and Marin, respectively, spoke of their specific challenges they face and the solutions they are coming up with.
Mr. Hymel discussed the five-year reduction plan Marin put into action two years ago.
As with other cities and counties, the economic downturn is impacting Marin in several ways, he said, including:
A slowdown in property tax growth and sales tax revenue, ongoing state budget reductions, higher required pension contributions due to market losses and greater demand for county “safety net” services, such as employment training, health care and other social service programs.
“As a result, we see the need for long-term restructuring to adapt to our new reality,” he said.