It is a case of the California legislatures promising outrageous pensions to government unions (and for themselves), and receiving campaign donations for their war chests. Its been criminal. No watchdog activity. Greedy unions, and Politicians that serve their bellies and not their constituents.
Now its either declare bankruptcy and void the pension contracts (the 'right' thing to do - given the circumstances that have gotten us to this point). Or rob from the tax-payers (via the continual class warfare route -- 'the eviiil rich must pay their Fair Share!!')...
I know what pass the California Assembly Critters want to take... We'll see how it goes...
It gets even funner. Like Social Security most state and federal pensions are inflation adjusted (most private pensions are not). Think about the positive feedback loop this situation is going to set up as we print more money to pay the pensions (you can be sure than they will pass some sort of Fed bailout eventually) and this money further increases inflation.
Those folks who thought they had good private pensions are in for a world of hurt. Anyone not invested in inflation protected investments is also going to feel considerable pain.