My Ratings of California's Bonds

California's GDP would make it the eighth largest economy in the world. It's current account deficit is $26 Billion [or $15 billion if you throw in a few accounting tricks].

BBR's (Bapcha's Bond Ratings) CA Bond Ratings looking forward twelve months: 100/100. We expect CA to substantially meet all of its fiscal obligations by doing whatever it takes to keep their ratings.

BBR's CA Bond Ratings looking forward five years: 95/100. This could change depending on the economy of course. We expect California to meet its fiscal obligations. However, there is a 5% chance that California could delay payments on its bonds by more than a month in the next five years.

BBR's CA Pension Liability Index in the next twelve months: 100/100. CA will meet all of its pension obligations in the next twelve months.

BBR's CA Pension Liability Index in the next five years: 95/100 CA will default on or modify the benefits to at least five percent of its work-force in the next decade.

BBR's CA Pension Liability Index in the next ten years: 80/100. CA will default on or modify the benefits to at least twenty percent of its work-force in the next decade.

BBR's CA Pension Liability Index looking forward thirty years: 0/100. CA will substantially NOT meet its pension obligations looking forward thirty years. Either a reduction in benefits, or an increase in contributions to the defined benefits plans that depend on CALPERS is a given.

The bottom-line: California needs to convert its retirement systems from a defined benefits system (the current existing CALPERS) to a defined contribution plan (much like a 401K or 403b plan).

Comments

[Jasper M:]

Well . . . I was all set to say something sarcastic, but, upon reflection . . . . he can't be worse than Moody's.

Good Luck, fella!

Jul 28 03:33 AM

[Drew Dillman:]

I agree that conversion of public employee retirement plans to defined contribution plans makes good policy. There is little reason that there should be a difference between public employees and the rest of the citizenry. Reality is that the future is not guaranteed for any of us. We are all in this together.

Jul 28 11:27 AM