Think Freely Media presents Common Sense with Paul Jacob

Babylon Goes Broke

California, pension, crisis, canary, cage, coal mine, spending, taxes

A few Babylonian, er, California cities going bankrupt — Stockton, Vallejo, and Bell — should be seen as more than dead canaries in a coalminer’s care.

Indeed, you don’t need special prophetic gifts to see the dangers posed by over-promising cushy pensions to government workers. Californians are coming around. And the state’s governor, Jerry Brown, appears to be “calling for reductions in gold-plated, unsustainable public-sector pensions,” as Nick Gillespie informs us at Reason.

But statewide reforms will not be easy. The problem is huge, presenting grave costs. “Absent the ability to alter pensions, states and localities have to devote more and more of their taxes to simply covering the costs of retired workers,” Gillespie explains. “Worse still, they often raise taxes to cover rising costs, typically at the expense of providing basic services such as police and road maintenance.”

Yes, over-promising defined-benefit pension packages effectively distributes wealth away from basic government services and into the pockets of the people with whom politicians work most closely.

Unfortunately, the courts long ago decided that politicians’ promises to employees outweigh basic government duties. That is, the courts determined that “public-sector employees at all levels of government had an inviolable right to the pension benefits that existed on the day they were hired.”

But the courts seem to be lightening up on this “California Rule,” and the governor has dared mention that, come “the next recession,” some headway might be possible.

No matter what you may think of this rather desperate hope, the writing is on the wall. And it is in red ink and numbers, not Babylonian.*

As America’s Babylon is finding out.

This is Common Sense. I’m Paul Jacob.


* And not “Mene, Mene, Tekel, Upharsin.”

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By: CS Admin


  1. Rick Rund says:

    We left America’s Babylon in November before it might collapse and the possibility of housing prices dropping off the cliff again. We are so happy to be living in a state where freedoms are something to be enjoyed and appreciated.
    Feel so sad for those stuck in california… Although its chances are very slim I truly pray that the State of Jefferson might become a reality some day!!!

  2. Gregg says:

    Being a pension actuary I have a little expertise in this area (35 years, meaning I’m old). CA pensions will have to be reduced for new and current employees and probably for retirees, something that has happened only in Detroit. KY pensions are just as bad, some state plans at 25% funding. If you added up all of the unfunded liabilities of public pension plans you would be in the same shape as Germany during hyperinflation – you would need to build more floors on the public buildings to store all the zeros. It would dwarf the current national debt especially if you add in the sleeper liabilities of subsidized retiree health insurance.
    Since these plans can continue until they spend every last dollar (and then become a pay-as-you-go system), it’s another debt that will fall on future generations.
    PS actuaries are partly culpable in this disaster.

    • JFB says:

      Generally, on the issue of public defined benefit pensions countrywide, the “leadership” (whom I would give the honorary title of “Madoff” to) can see the headlight of the train, hear its roar but continues to walk into the tunnel. The result is predictable and will be painful.
      Michigan went to defined contribution 403B systems for some of it workers, both state and municipal. The teachers union avoided that fate for its members, and will therefore eventually regret that decision when the bank is broken.
      Yes, to some degree it was the actuaries fault. In Michigan funding “requirements” assumed an 8% safe and sustainable growth rate, with the legislature underfunding even that regardless of an State Constitutional prohibition of doing so. The Courts and administrations allowed it and still they name roads, buildings, and schools after members of the lot.
      Not my personal issue but certainly one for my children and grandchildren.

  3. Karen H says:

    It’s not just the pensions that are bankrupting California. It’s the programs & subsidies. The giveaways in this state are unbelievable. For starters, there are refugees who have been given assimilation benefits since the mid-90s, which includes health care, education, food stamps, housing credits (Section 8) & a monthly stipend. These refugees have paid nothing into the system. Americans can’t get these benefits & there is no cap. & this is extended to their children. Now some of the kids do use their education to contribute to society, but there are many that walk the street on a never ending party. I once asked 1 of them – who has been assimilating since 1995 – how long it would take to assimilate? He’s never spoken to me since. I could go on; but no one listens in this sanctuary state.

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