From one end of California to the other, hundreds of cities are facing a tsunami of pension costs that officials say is forcing them to reduce vital services and could drive some—perhaps many—into functional insolvency or even bankruptcy.
The system that manages pension plans for the state government and thousands of local governments lost a staggering $100 billion or so in the Great Recession a decade ago and has not recovered. The California Public Employees’ Retirement System (CalPERS) is rapidly increasing mandatory contributions into its pension trust fund to make up for those losses, cope with a host of rising expenses and, it would appear, stave off the prospect of its own insolvency.
City managers, facing annual increases in contributions of 15-plus percent, are feeling the squeeze, which a new Stanford University study finds is crowding out “resources needed for public assistance, welfare, recreation and libraries, health, public works, other social services, and in some cases, public safety.”