The Next State Crisis

CalPERS has warned state, city and county governments their annual pension contributions could increase by nearly one-third -- the same percentage as the losses in the value of the fund's investments during the disastrous 2008-09 nosedive of stocks, bonds and real estate. No one is quite sure what the fund will actually dun its contributors, though, as stock and bond markets might rebound before next summer even more than they already have....Contributions from cities, counties and special districts now come to about 13 percent of payroll, but that could rise anywhere from 2 percent to 5 percent of payroll despite efforts to spread the losses and increases in contributions over 30 years.... For a city like Fullerton, in Orange County, that could mean $5.5 million a year for four years in added payments that have to be made regardless of other obligations. Payments by larger cities might increase far more even as they're seeing big drops in tax revenues from 2007 levels because of recession and the housing bust. For sure, labor unions won't willingly give back any pension rights. The result will be that hundreds of cities and counties will have to tap their rainy-day funds -- if there's anything still in them after two tough years.....Because public employee pensions of all but a few cities, counties and other public entities are administered by CalPERS, the crunch will be felt in every part of the state -- unless CalPERS' investments suddenly pick up.

Facing a budget deficit of more than $20 billion, Gov. Arnold Schwarzenegger is expected to call for deep reductions in already suffering local mass transit programs, renew his push to expand oil drilling off the Santa Barbara coast and appeal to Washington for billions of dollars in federal help, according to state officials and lobbyists familiar with the plan.