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Dan Walters: California pension funds' shortfall may be something to cuss about

The Legislature, whose public standing in polls is rock-bottom, did it itself no favors when it approved a resolution calling for Californians to observe a "cuss-free week."

The action predictably attracted wide public attention, but most of it probably reflected Republican Assemblyman Chris Norby's comment: "With the state broke, I don't know that this is what we should be spending time on."

If the Legislature wanted to repair its very tarnished public standing, it would deal seriously with California's long list of public policy issues. As Treasurer Bill Lockyer recently advised lawmakers, stop introducing useless pieces of legislative junk that inflate their bill counts but contribute to the Capitol's image of irrelevance and foolishness.

The chronically unbalanced state budget, of course, tops the list of the Capitol's unfinished important business. As they desperately seek some more gimmicky "solutions" that would merely postpone the day of fiscal reckoning another year, the Capitol's denizens ignore their own advisers who say that California faces a semi-permanent gap between income and outgo that can be closed only by the politically distasteful choices of reducing spending or raising taxes.

This reality-ignoring attitude extends beyond the budget, however, and is evident in myriad other issues, such as the state's rapidly deteriorating public education, transportation and penal systems. Then there are the massive pension systems that cover millions of state and local employees and retirees.

The biggest of the bunch, the state-local California Public Employees' Retirement System, has been buffeted by scandal – many millions of dollars in payments by firms seeking slices of the system's multibillion-dollar trust funds to placement agents, including former officers.

It's a pretty juicy scandal that's attracting not only journalistic attention but that of federal and state prosecutors. More important, however, are fears that the pension funds, having lost billions on speculative stock and real estate investments, are now dangerously underfunded.

Recently, a team of Stanford University researchers delved deeply into their underlying actuarial assumptions and concluded that CalPERS, the California State Teachers' Retirement System and the University of California pension fund may be an eye-popping half-trillion dollars underfunded when prudent standards of risk are applied.

A serious and relevant Legislature would launch an objective, exhaustive examination of the Stanford findings and the pension systems' solvency claims on behalf of state taxpayers and public employees who would be on the hook for shortfalls – even if such a study would upset influential public employee unions.

If it turned out that the pension funds' travails are something to cuss about, so be it.

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