I don't think the liabilities are going to shrink on their own, I'm just trying to put the total cost in perspective.
You see a lot of people talk about the unfunded pension liabilities in apocalyptic terms. And when you hear figures in the hundreds of billions, or trillions of dollars, it sounds insurmountable. It sounds like a bomb waiting to go off that no one is dealing with.
But it isn't. The State is currently over-paying its required contributions. The State is not ignoring the problem. This thread spawned out of the assertion that California's budget is a mess. It started with a discussion of the 2020 budget deficit, and then spiraled into whether the pre-pandemic budget was a fiction which ignores public pensions. My assertion is that the budget was not ignoring the problem, the 2019 budget was funding pension liabilities at a level sufficient to dig out from the hole we are in over the next three decades.
It's also important to point out that the State of California is not the only entity required to fund the shortfall in CalPERS and CalSTRS. The State's liability in CalPERS is about $60 billion. The remaining $70 billion is owed by localities and other special districts.
None of this is meant to claim that the problem is not real. California is going to have to pay an awful lot of money for the next several decades. But that is an awfully long time horizon, with room for an awful lot of economic growth, and if we continue to prudently make payments towards the liabilities each year, it's not apocalyptic at all.
Importantly, the liabilities are owed over a long time horizon, and they don't scale with economic growth, or population growth. They are static. Meanwhile, in the past 30 years, California's real GDP has increased by a bit over 100%. Thirty years from now, it's entirely possible we'll have 2x the 2020 dollars available to pay the liability.