Mind-Boggling California Pension Crisis Gets Catchy Name ‘Silver Tsunami’
The San Francisco Chronicle notes ‘Silver Tsunami’ Hits as Pension Costs Devour California School Budgets. I reordered some of the paragraphs below for clarity.
School systems are getting hammered by the rising costs of pension and health care commitments. California is not an anomaly. Districts throughout the nation are facing the same squeeze.
The size of these unfunded liabilities is mind-boggling. Nationally, the estimate is $1.4 trillion. In California, it’s $97 billion for teachers and other school employees as of 2015-16. To put this into perspective, total venture capital investment in educational technology since 2010 was $2.3 billion.
Just when you think it couldn’t get worse, California has more than $92 billion in unfunded health care liabilities. By 2030, Los Angeles Unified School District, serving more than a half-million students, is projected to spend half its budget on retiree pension and health care costs. Hundreds of other districts could make dramatic budget cuts or even go bankrupt.
And how did we get into this situation in the first place?
Money is boring: And only boring people like chief financial officers talk about money and use phrases like “unfunded liabilities.” Interesting, cutting-edge people talk about “disruptive innovations” like personalized learning, or anything with the word “maker” in it.
Money is politically messy. Everyone wants funding for their favorite education project. In this zero-sum world, no one wants to talk about making tough choices. Even fewer want to discuss sensitive topics such as pension and health care liabilities.
Education finance has never been part of our nation’s education wars. Most of the opinion makers in education are like the Great Houses of Westeros in the HBO series “Game of Thrones.” They are much happier fighting each other to the death about issues like unions and charter schools than focusing on the more powerful forces that could destroy them all.
Unlike the fantasy world of Westeros, there are no magical solutions or heroes coming to save us. The problem may seem insurmountable, boring and politically dangerous, but ignoring it places the future of California’s education system and our children at risk. Responsibility for its solution lies with all of us.
I picked this story up from John Rubino at Dollar Collapse. Rubino comments:
With 10,000 or so baby boomers – many of whom are public sector employees – turning 65 every day, pension imbalances will explode in the coming decade. That means life gets harder for pretty much everyone who drives, needs police protection or has kids in school. Which in turn makes politics even more unstable and unpredictable than currently.
At the same time, the weakest pension plans and their cities will be forced into bankruptcy, leading to panic among the not yet bankrupt and – now we’re getting to the systemic risk – the owners and potential future buyers of the bonds cities and states issue to keep afloat. When the muni market dies, so does much of the rest of the US financial system.
Game of Thrones
How the Chronicle authors came up with the name ‘Silver Tsunami’ is a mystery. Perhaps I do not understand because I do not watch the Game of Thrones.
The Chronicle authors comment: In “Game of Thrones,” that force is the White Walkers. In education, it’s the “Silver Tsunami” — the tens of billions of dollars in pension and other post-retirement benefits guaranteed to retirees.
Mike "Mish" Shedlock