March 3 (Bloomberg) — California's next generation got some good news recently when Assembly Speaker John Perez called upon lawmakers to act this year to find a solution to the state's largest fiscal issue — the $80 billion unfunded liability of the teacher pension system.
Perez's urgency was in contrast to the timeline proposed by Governor Jerry Brown, who in January acknowledged the severity of the crisis but suggested a solution be put off until next year.
Perez cited one pressing reason for immediate action: the teacher pension debt is growing by $22 million per day. But there's another reason that politicians in California never discuss: If they don't act, the obligation will end up costing more than twice as much as it would if they took immediate action. That's because, in the absence of action, the teacher pension debt will be subject to the same rules as a zero-coupon bond.
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