The media keeps touting how California Governor Jerry Brown has created a surplus while also balancing his state’s budget. But if one digs a little deeper, it becomes obvious that he’s simply “kicking the can down the road.”
A portions of that so-called extra money will automatically come off the top for public schools, and California’s new rainy day fund, leaving only about $2 billion or so to cover all sorts of needs, most of which will have to be put off until next year.
A third of the state’s spending’s earmarked for the poor, In order to maintain this safety net, the state will have to raise grants to disabled individuals beyond $881 per month or $1,483 for couples.
To avoid tuition increases for University of California students, it’ll cost the state upwards of another $100 million. And by raising Medi-Cal reimbursements to doctors so they stay in the system, it will cost around $300 million.
Enrollment in the state’s healthcare program for the poor, known as Medi-Cal, has exploded by 50% since Obamacare took effect. Over the next year, Medi-Cal enrollment will reach 12.2 million — about a third of the state’s population.
Obama’s new immigration policy will also increase healthcare costs as more than a million people who are in the country illegally, will qualify for Medi-Cal. Those costs have not been calculated by Brown’s administration.
Then there are the state roads which need tens of billions of dollars in overdue maintenance. Brown’s proposed budget lacks funding for them or other infrastructure needs.
There’s also CalPERS, which administers a $260 billion investment portfolio for 1.7 million past and present public-sector workers and CalSTRS, a $166 billion fund that caters to teachers. CalPERS can unilaterally raise the contributions of public agencies, but CalSTRS can’t do that.
And if the fund runs out of money, which could happen as early as the mid-2020s, school districts will be on the hook.
Brown has also lengthened the peak-salary period from one year to three for calculating pensions, capping salaries at which new recruits can earn pensions to $110,000 and reducing the payout formula to two-percent at age 62. But the rules only apply to new hires.
Currently California’s public pension funds underwater by $754 billion. Unfortunately paying for all the health benefits promised to current state employees when they retire will cost almost $72 billion, taking a larger chunk from the state budget than is now spent on retirees’ coverage.
As Dan Walters of the Sacramento Bee writes: “Add it all up, and California is ignoring at least $10 billion a year in debt payments that current politicians are avoiding but that their successors and taxpayers will have to shoulder at some point.”
UPDATE 01/14/2015: A former CalPERS board member under investigation for corruption killed himself inside the gun store, ‘Big Shot’ on Double R. Blvd, in south Reno. Police say they found 71-year-old Alfred Villalobos with a single gunshot wound to his head, and a 9mm semi automatic handgun near him.
Villalobos had been accused of bribing Frederico Buenrostro Jr., a former chief executive of the California Public Employees’ Retirement System, in exchange for Buenrostro’s help in getting CalPERS to make investment decisions that benefited Villalobos’ clients. Villalobos faced up to 30 years in prison if convicted.