When the city’s annual financial statements were presented to the City Council on Wednesday night, there was a piece of unsettling news:
The city owes some $39 million in unfunded liabilities for pension payments.
And those liabilities are likely to get bigger.
Madera isn’t the only city with pension-liability problems, primarily because the state Public Employee Retirement System has been mismanaged by cockeyed optimists.
Over the years, large increases in pensions have been granted by PERS to people who haven’t earned them. Those handouts started some 20 years ago when the stock market was hot and it looked like the state’s investments were going to forever produce pension money, like water out of a fireplug.
Then the recession hit.
But the pension rates were not cut.
As a result, Madera and other municipalities find themselves holding the bag for pensions they’ll never be able to pay without huge taxpayer sacrifices.
Cities like Stockton and Los Angeles owe huge pension liabilities, and will continue to owe more because every day their pension debts grow.
Madera and other agencies have cut some pensions so that the debt grows at a lower rate, but there’s no question the debt will continue to grow.
An organization called the California Policy Center estimated that the state as a whole owed $1.3 trillion in pension debt in 2015, and that the debt at that time represented 52 percent of our gross state product. In other words, for every dollar you earn, you owe 52 cents of it to state pensioners.
There are other state debts: “Along with the pensions are billions of dollars in deferred maintenance and upgrades to California’s infrastructure,” says a California Policy Center report. “To the extent California’s government has not maintained investment in infrastructure maintenance and upgrades to keep up with normal wear and to keep pace with an expanding population, it has passed this cost on to future generations who will have to issue additional debt to pay for this expense.”
If you wonder why Madera isn’t much of a city — why its streets are in poor condition, why its sewers and water system are inadequate, why it has a difficult time attracting new businesses, the answer may partially lie in its struggle with debt.
Take a look at the story in this (May 5) issue, and you will see that although a new, third, high school is being planned and work is under way on it, the project is more than $30 million short of enough money to complete it.
The school board has been working to put money in a school construction fund, but teachers object to that. They want that money now for salary increases. And, of course, you can’t blame them.
Government employees have become the new upper middle class — comparatively the new millionaires — in Madera and other California cities and counties of similar size. And they want to keep up with the Joneses.
The public, however, (and this includes public employees) not only pays ever-increasing wages of public employees, but those wages carry pension obligations with them.
For Madera, that $39 million is a heck-of-a lot of money, and it will be $49 million before we know it.