California’s state and local governments face billions of dollars in debt – the official term is “unfunded liabilities” – for employee pensions not now covered by pension fund assets.
But how many billions?
It could be about $300 billion, according to new calculations by Stanford University researchers, but that assumes that projections of future investment earnings used by pension trust funds, around 7.5 percent a year, are accurate.
Or the debt could be three-plus times as much, close to $1 trillion, if the earnings assumptions track federal treasury notes, according to Pension Tracker, a research project headed by former Democratic Assemblyman Joe Nation.
If nothing else, the newly released Pension Tracker data demonstrate that an earnings assumption – the “discount rate” – is the most important factor in judging whether pension debt can be reasonably managed, or a crisis that could drive government agencies into insolvency.
Three cities have been forced into bankruptcy, largely due to soaring pension costs, and others are feeling the pinch as costs rise.
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