Lest there was any doubt, it is now clear that the pension bill Gov. Jerry Brown signed last September was not reform, it was merely a tweak.
The legislation made only small moves toward containing future pension costs and did nothing to unbury taxpayers from hundreds of billions of dollars of debt created by past underfunding of public-sector retirement systems across California.
Now, the nation's two largest public-pension funds, both in California, are rightly warning that their debts pose serious financial threats and that they need billions of additional government dollars to prop themselves up.
The problems at the California Public Employees' Retirement System and the California State Teachers' Retirement System have a common thread: They each lack sufficient money to pay for pension benefits workers have already earned.
Using even their overly optimistic assumptions, CalPERS and CalSTRS have a combined $173 billion unfunded liability. It works out to about $14,000 per California household. That's debt we're unfairly pushing onto our children and grandchildren.
Pensions are supposed to be pre-funded when workers earn the benefits. That means enough money should be set aside so that, after investment returns, the funds will cover retirement payments when they come due.
But CalPERS and CalSTRS made, and continue to make, unrealistically optimistic assumptions about investment returns. So they didn't ask for enough money up front. To be sure, both systems were plagued by losses from the Great Recession. But the seeds of this crisis were planted long before 2007.
CalPERS relied on those unrealistic forecasts and irresponsible accounting to defer funding the system. Now Chief Actuary Alan Milligan warns that it must change its accounting rules and ask state and local governments to kick in more money to make up its shortfall. Rate increases had already been expected; Milligan now says they should be even larger.
He's right. In fact, it's not enough: His numbers show that even with the increases, CalPERS sill risks dangerous underfunding some time in the next 30 years.
CalSTRS also relied on questionable accounting assumptions. But Capitol politics compounds its problem. The teacher pension program sits at the mercy of state legislators and the governor to set contribution rates that adequately fund the system. For more than a decade, they have failed to do so.
The debt has grown so much, the state Legislative Analyst's Office warned last month, that making CalSTRS whole could be the state's most difficult fiscal challenge, requiring an additional $4.5 billion each year for the next three decades.
To put the dollars in perspective, consider Brown's other big political victory last year, Proposition 30, which temporarily raised sales and income taxes. The initiative will bring in an additional $6 billion in 2016-17, the final fiscal year before the tax increases phase out. By that same year, the needed increases in state contributions to CalSTRS and CalPERS will be more than $6 billion -- and still growing.
So much for pension reform.