California, Texas Share Big Pension, Retirement Liabilities

Published September 18, 2015

One state is known for its Mediterranean climate and cities filled with Hollywood stars and Silicon Valley magnates, while the other state is known for its dry weather and expanses of oil and natural resources buried beneath the ground.

California and Texas may not seem to have much in common, but both states have massive amounts of pension debt.

Elected officials in California and Texas have chosen to ignore the mounting debt of their government worker retirement programs. They plan to pay off services being used today at some point in the future by charging them to future taxpayers.

This defies the intent of their states’ constitutional requirements for a balanced budget, and it ultimately forces their states’ taxpayers deeper into debt.

California Dreamin’ of Debt

In our recently published report, “The Financial State of California,” Truth in Accounting found the Golden State is sinking under $235 billion in net debt.

This number—far more than California’s official numbers published in the state’s “Comprehensive Annual Financial Report”—is obscured by the state government’s use of outdated accounting practices. These practices cause 74 percent of the state’s total retirement liability debt, or $111 billion, to remain undisclosed on the state’s official balance sheet.

Texas-Sized Debt Problem

Despite the massive wells of black gold sitting beneath the Earth’s surface in Texas, a similar story is playing out there. Texas has $130 billion in liabilities, including $81 billion in undisclosed entitlement debt kept off the state’s official ledgers.

Now let’s bring these astronomical figures down to Earth and make this a bit more personal. If California’s debt were to be paid off, each movie star and surfer dude—and everyone else in the state—would have to fork over more than $20,900. To pay off Texas’s debt today, everybody in the state would have to contribute about $8,300.

This amount of debt is so formidable that the way in which current elected officials in California and Texas choose to handle the situation today will greatly determine the future  financial survival of their governments and the condition of their economies, as well as those of their future taxpayers.

Sheila Weinberg ([email protected]) is the founder and CEO of Truth in Accounting.