Tuesday, January 8, 2013

Pension Shortfall in Illinois - Implications for California

Sooner or later you run out of other people's money, Margaret Thatcher is quoted as saying about socialism.  In Illinois, the day is coming sooner than in other states.  The pension shortfall for state workers is at $95 billion and growing at $17 million per day.  The WSJ calculates that this works out to $7300 for every man woman and child in the state.  Governor Quinn called for an emergency panel that would come up with some recommendation that would become law unless the legislature vetoed it.  If that sounds un-democratic and un-republican, to you, you're not alone.  For once I agree with a labor leader on the issue:
Daniel Montgomery, president of the Illinois Federation of Teachers, said he and other public-sector union leaders were staunchly opposed to Mr. Quinn's last-minute plan. 
"They abdicate their responsibility. They're elected to solve the problems of the state. Now they're saying: Let's create a commission of people who don't even have to be elected, who aren't responsible to anyone, and who may not know anything about the issue—and whatever they say becomes law," Mr. Montgomery said.
Precisely.  But hey, the lame duck session that failed to produce any kind of solution had time to address that most pressing problem, driver's licenses for illegal immigrants.  That's right, can't deal with a pension crisis but you can deal with a subject better left to the incoming legislators.  Governor Quinn said he will be happy to sign it.

Meanwhile, California's population isn't growing like it used to, with far less growth in the 0 to 10 age range than before.  How is this related?  Demographic imbalance exacerbates pension problems, whether for state workers or social security recipients.  So I expect Californians having fewer children in school to eventually translate to fewer workers to support the same number of state employees.  Because the state isn't going to reduce its employee count in the face of declining population.
Declining migration and falling birthrates have led to a drop in the number of children in California just as baby boomers reach retirement, creating an economic and demographic challenge for the nation's most populous state. 
But what really scared me for the future of the state's economy was this bit:
With more than 90% of the state's children under age 10 born in the state, "the majority of the next generation of workers will have been shaped by California's health and education systems,"
Given California's infamous inability to educate our youth, we are in deep trouble.

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