What’s the difference between General Motors and California?

California hasn’t gone bankrupt. At least, not yet.

Over several decades the leaders of both GM and GS (that is, the Golden State) caved in to the demands of aggressive unions, choosing what seemed the path of least resistance. Both gave their employees richer and richer retirement plans during their respective boom years and assumed that their revenue growth and the hefty returns on their pension fund investments would go on forever. Not so long ago, in fact, officials of both GM and California boasted that their employee pension plans were in good shape.

When the economic crisis struck and car sales collapsed that fall, GM’s cash reserves evaporated, even as repeated rounds of layoffs left the company saddled with ten retirees for every active employee. The company required a massive federal bailout and bankruptcy to stay in business. Only thanks to cash from the feds did GM’s retirees keep their pensions intact. Retirees of GM’s then-bankrupt auto-parts subsidiary, Delphi Corp., also kept their benefits.

In the Golden State, meanwhile, the California Public Employees’ Retirement System, or CalPERS, had sharply increased benefits for state retirees in 1999. “CalPERS’s investment returns provide this historic opportunity,” then-board president William Crist declared, “without causing any additional taxpayer burden.”

Since then the state’s public employee pension outlays have ballooned by 2,000 percent, while state revenues have increased only 24 percent. In the current fiscal year alone, some $3 billion has been diverted from other state programs to pay pensions. And California’s general obligation bond ratings from all three agencies — Fitch Ratings, Moody’s Investors Service and Standard & Poor’s — are the lowest among the country’s ten most populous states.