Rhode Island is a tiny state with just over one million people in one thousand square miles. California is 37 times more populous and many times that size. And yet, when it comes to public employee pension reform, the tiny state of Rhode Island is acting both bigger and bolder.
For years, Rhode Island lawmakers watched fearfully as the state’s required pension contributions, the second-fastest-growing line item in its budget, exploded, doubling from 2003 to 2010. Without significant reforms, the liability was on track to double again by 2013. Lawmakers knew that if the pension liability remained unchecked, it would severely limit funding for other budget priorities.
California finds itself on a similarly unsustainable path. Earlier this month, the California Teachers’ Retirement Board announced that the $152 billion pension fund faces a $64.5 billion shortfall over the next three decades, an increase of $8.5 billion from last year. To put this in perspective, California spent $64.4 billion on K-12 education during 2010-11. Unless California acts to make its pension system more sustainable, the K-12 education budget – along with other important government priorities – will likely be carved up to feed the ever-growing pension deficit.