At the RAND Blog Dan Grunfeld outlines California’s public pension problem:
California leads the nation in pension underfunding. The numbers are staggering. Currently, the state government has approximately $464.4 billion in unfunded liabilities — the difference between resources that will be available in the state’s pension fund and what will be owed to retiring employees. To provide some context, on an inflation-adjusted basis, that figure represents nearly two-thirds the cost to the U.S. of the entire Vietnam War. Nationally, state and local governments are carrying $4 trillion to $6 trillion in unfunded pension liabilities. That exceeds the combined military expenditures for every war, save World War II, fought by the U.S. since 1775. The California Public Employee Retirement System (CalPERS) and the California State Teacher’s Retirement System (CalSTRS) have reported a combined $136 billion in unfunded pension liabilities. Los Angeles County alone has $7 billion in unfunded liabilities, and San Francisco’s burden is $2.3 billion. This particular bomb will not be easy to defuse. “The severe underfunding of public pension plans will not be fixed easily or fast,” says my RAND Corporation colleague James Hosek. “There is no silver bullet.”
Illinois has a similar problem. Plus its population is declining in absolute terms meaning that there are fewer people to bear the tax burden that will be required to meet those obligations.