Thread by @skepticaliblog

California's economy is hyper-cyclical: it outperforms the nation during periods of growth—but underperforms massively in a recession.

The California economy—and state budget—is about to get absolutely slammed.
pewtrusts.org/en/research-an…

2/ At the same time as states are incurring huge costs responding to the pandemic public health crisis—they are facing cratering consumer and business activity because of the shutdown.

A large amount of regular tax revenue just got vaporized overnight
routefifty.com/finance/2020/0…

3/ Now for the *really* bad news

Prior to the market meltdown, state public pension plans were on average ONLY 72% funded—and about 40% invested in equities😬

According to Moody’s, a loss of just 6.2% in assets requires a 32% increase in contributions
routefifty.com/finance/2020/0…

4/ California was *already* headed for fiscal doomsday—even before the pandemic

HALF of California cities were not even saving enough money to pay pension benefits in just FIVE YEARS, according to State Auditor Elaine Howle

In a spell of record growth😲
usnews.com/news/best-stat…

5/ It gets worse.

It’s not *only* pensions that threaten to sink California’s cities.

More than 70% of cities in CA do not have **ANY** funds set aside for other post-employment benefits—such as retiree health care—according to Howle

None. Zero. Zilch.
dailybreeze.com/2019/10/24/la-…

6/ Budget watchers now expect that California might need to use the entire rainy-day fund—and possibly much more money—to prop up vital government services that could be severely underfunded by a quickly collapsing economy
latimes.com/california/sto…

7/ “Jaw-dropping”

The unprecedented $54.3 billion deficit is nearly 37% of the state’s general fund😲

It vaporizes the $16 billion rainy day fund—three and a half times over

It signals a financial tsunami—cuts to schools, health care and other programs
calmatters.org/economy/2020/0…

8/ Meanwhile, the public pension fiscal cancer consuming California *accelerated*

In the largest single quarterly drop in the history of this index, the funded ratio sank to 66.0%

35 of the 100 largest plans are now below 60% funded.😲
#FiscalDoomsday
milliman.com/en/insight/Pub…

9/ Gov. Gray Davis' pension law, SB 400, was California's fiscal Chernobyl

By 2016, state employee pensions cost taxpayers $5.4 billion—more than 30x what the state paid for retirement benefits in 2000

Voters recalled Davis—but the fiscal cancer spread
latimes.com/projects/la-me…

10/ California residents will soon become bitterly familiar with the term "service insolvency"

In the words of former San Jose Mayor Chuck Reed: "What is a city?"

Context—this is a chapter from the great Michael Lewis' book "Boomerang", and a great read
vanityfair.com/news/2011/11/m…