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California Taxpayers on the Hook

This is a follow-up to Rodney Johnson’s post today on state finances.  In the Wall Street Journal, we read today that “More Pain for State’s Taxpayers, Cities” is on the way.  The Journal writes,

The cost of shoring up Calpers, the troubled $200 billion pension fund for California public employees, will ultimately fall on the state’s 38 million residents, who are already dealing with tax increases and reduced public services.

The state and local governments are contractually bound to increase their payments to Calpers to help it make up for its investment losses of more than $50 billion in the fiscal year ended June 30.

California already had to spend $3.3 billion from its stretched general fund in the last fiscal year to make up for Calpers poor investment performance.  Cities and counties too have had to pour new monies into the fund at a time when they can scarcely afford to pay the electric bills in their offices.

There is no easy way out here…and green shoots or not, California’s problems are just beginning.

Charles Sizemore, CFA
Co-author of the recently-published Boom or Bust: Understanding and Profiting from a Changing Consumer Economy