Last Sunday night 60 Minutes did a piece featuring David Walker, Comptroller General of the US Government. Walker has been touring around the country warning anyone who would listen that we are facing financial disaster, an inconvienent truth that no one wants to talk about. Much of what is happening has to do with entitlement benefits granted by our government that there is no reasonable way we are ever going to be able to pay for. It is not just simply a matter of raising taxes, the liabilities are way too high for that.
I feel a kinship with Walker in that I am attempting to sound the alarm to awaken voters that the same thing is also happening on the state and local level. Here in Napa we are overextended on our pension obligations in the ten of millions, and the City says that even with 30 positions left vacant fringe benefits have exploded 132% in the last three years alone.
On the state level, we are now $240 billion short of current obligations, and they increase, a lot!, every year. We collected $37 billion total in state income taxes in California last year. You do the math, how big of a tax raise would we have to have to cover that? And remember, it is going up every year.
When you add up all that is unfunded and currently obligated for pensions of local government statewide, that would be all the counties, cities, special districts, etc added together, the current figure is in the $200 billion range.
We are in an unsustainable position, and few people are awake to the gravity of the situation. Many people are now pushing for universal health care coverage in California, which in light of our financial situation is highly unrealistic. Maybe it's a good idea, but we can't even cover a relatively small State budget deficit of $6 billion this year. We have enormous obligations hovering over us, and it is going to be a tsunami of debt that is going to cascade down on us if we do not do something, and now.
This reminds me of the warnings that took place during the recent stock market bubble. For about three years in the late 90's I was a day trader in the stock market, trading my own portfolio on line, riding the wave of the boom in tech stocks.
At that time, a few wiser heads warned that this was unsustainable and we were heading for a big bubble burst. Most ignored that, and bought ridiculous theories of how it really was different this time, and an internet "company" that was little more than a desk and phone really did justify the huge valuations they were getting.
No one listened then, and so far they are not listening now. The special interests who have something to lose are going to tell you that this is all alarmism, that things are not really that bad, that we can cover it, yada yada yada.
Numbers don't lie. If your blood pressure is 190 over 110, you have high blood pressure. If the temperature is 110 degrees, it is hot outside. Rocks are hard, water is wet, and grass is green. If you have a quarter trillion dollars in obligations and only $90 billion in tax collections to cover it, you are running headlong into disaster.
What are we going to do? First of all, I am not an alarmist, for these are the facts, and I know that we are going to solve this problem. The key is citizen involvement. Voters have to wake up to what is happening, and have to get involved. This is why I started the Napa Valley Taxpayers Alliance, to address this issue on our local level to protect us from this problem here. The problems are interlocking between the Federal, State, and local governments, but there is much that we can do on the local level.
Governments have made these poor decisions, and governments can reverse them and remedy them, but there has to be voter involvement and demands to do so. So far there has been very little pressure from taxpayers.
Government pensions have to be scaled back, which should realistically not be as painful as some are going to tell you that it is. For one thing, they have gotten unrealistically generous which is a big part of the problem. When the average age of retirement approaches fifty years old, and the taxpayers who are funding that retirement are on average not able to retire until well into their 60's, you have not only an inbalance in fairness, but the money to support those retirements is not there. Age of retirement in the public sector has to be brought closer in line with that in the private sector. That alone would save billions.
There is no reason that non safety government employees should be able to retire younger than 65 like their public sector counterparts. Former Assemblyman Keith Richman addresses this in this column.
Also, new employees should be on different system, a defined contribution system like most private employees, similar to a 401K. That alone would save the retirement system and reduce costs for taxpayers. It would also give retirement benefits to those who stayed less than the vesting time under a defined benefit system, usually around fifteen years.
What that means is that if you worked for ten years for the government, you would have an account worth ten years of contributions that you could take with you to whichever other job you had. The way it is now, a worker would have nothing toward retirement if they leave government service.
There are many solutions to these issues, but so far there is no political will. We cannot wait much longer. Unless the government is pressured it is far easier to borrow and put it off for another day. Well, another day has become clear upon the horizon and is sailing towards us quickly.
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