California Gov. Jerry Brown just signed SB 1234, a bill that establishes the California Secure Choice Retirement Savings Trust, a state-run retirement fund for 7.5 million Californians. All firms with more than four employees will be forced to participate unless they already offer a retirement plan. Unless they opt out, private sector employees will see 3 percent of their salaries automatically deducted from their paychecks to be held in trust by a panel of politicians and political appointees.
What could go wrong?
Per section 100004 (c) of the new law: Moneys in the program fund may be invested or reinvested by the treasurer or may be invested in whole or in part under contract with the Board of Administration of the Public Employees' Retirement System or private money managers, or both, as determined by the board. What is the California Public Employees' Retirement System or CalPERS for short? It's America's largest public pension fund with some 1.8 million current and retired government employees.
But, as with many public retirement systems around the nation, CalPERS is grossly underfunded. Including the California teacher retirement system and smaller local government systems, the unfunded liability for future retirement payouts is about $991 billion, according to the Stanford Institute for Economic Policy Research's Pension Tracker run by Joe Nation, Ph.D., a former Democratic member of the California State Assembly.
Since cash is amazingly fungible in government hands, dragooning some 7.5 million Californians into a retirement system that supports 1.8 million state government workers by levying what amounts to a 3 percent payroll tax is going to go a long way towards ensuring CalPERS' short-term solvency while, perhaps more importantly, building public support for bailing out CalPERS' looming trillion-dollar shortfall.
7.5 million Californians will be made to care about CalPERS fiscal health.
An underfunded governmental pension system is a classic Ponzi scheme waiting to happen. The earlier people who sign up can do quite well, while the latter enrollees are likely to lose badly. One way a government can keep the scheme alive is by enlisting more payees at the bottom to pay off the ranks above them. Which works, until their turn comes.
My family has done rather well in this Ponzi scheme. My mother had an excellent pension and health plan as a result of her years of service to the University of California. My father is still benefitting from this because the health care package available to him as a high school teacher, and yes, private law school president were far inferior.
People who take advantage of government programs are not at fault. It's the fault of the politicians who use tax payer's money to buy votes for themselves.
My family has done rather well in this Ponzi scheme. My mother had an excellent pension and health plan as a result of her years of service to the University of California. My father is still benefitting from this because the health care package available to him as a high school teacher, and yes, private law school president were far inferior.
People who take advantage of government programs are not at fault. It's the fault of the politicians who use tax payer's money to buy votes for themselves.
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