California's Biggest Issues

California Pension Funds

One of the greatest challenges is that some of California’s pension funds are structurally underfunded and short millions of dollars per year, based upon their current set of assumptions (e.g., the number of workers and retirees, average retirement age, life span, rate of wage growth, and the investment returns offered to employees).  What this shortfall means is that California’s pension systems have promised retirees more than what they are currently able to pay. 

If the California pensions funding gap does not work mathematically, how can it be resolved?  Will the promise of employee pensions simply disappear?  After all, even if total contributions increase (from employers and employees), funds would still be severely underfunded.  One possible change, lowering assumptions from 7 ¼ to 6 ¼ percent, would conceivably bring contributions up over a 10 year horizon.  In the end, whatever the State takes to fund the teachers' pension funds, for example, will likely have to come out of the classroom—specifically, teachers’ take home pay. 

Demographics and State Politics

One of the broader underlying issues is the aging population.  The growing pool of retirees and shrinking work force at national and state levels means lessening revenues and increasing fiscal burdens for governments, which provide services to retirees.  This strain on the system means that immigration, particularly of young people, will likely play an important role in California’s future.  

If a public servant wishes to be elected in California today, she is confronted with the demographic reality that the real decision makers in the state are minorities from Latin America and Asia.  Minority groups are equipped to determine their future for themselves. 

As a result, the political power struggle between certain groups (e.g., Latinos and African Americans) occurs at the lowest levels, such as school systems, often determining who gets what.  Furthermore, California’s union membership has increased in part because Latino leaders see unions (not the mayor or governorship) as their bases of power, just as African Americans did twenty years ago. 

Education

Perhaps the single biggest issue in California, related to both the pension and political demography issues mentioned above, is the school problem.  If graduation rates do not improve, L.A. risks becoming a less attractive place to live and raise a family. 

Charter schools have been a great source of improvement.  For example, half of the schools in Washington D.C. are now public charter schools.  One charter school in California implements double math and English into its 9^th grade curriculum in order to bring students, who are often three years behind at that point, up to speed.  However, they alone are not enough.

Charter schools also have untold effects on communities.  Magnet and charter school bussing often means children don’t go to school with peers from their own neighborhood anymore.  This depresses real estate prices in those areas, whereas places with their own school systems have stronger pricing, forcing parents to decide whether to send their children to charter schools, or to stay and fight.

Though other occupations are more sheltered, teachers are often the closest to the ground.  In a sense, schools feel society and determine what society is, so fixing the schools means fixing society.  The family must be the unit that sees the value in education.  If not, then there is little the government can do about it.