Study: California Public Pensions Underfunded by Over $500B

California's three major public pension funds are underfunded by more than half a trillion dollars, according to a report released Monday, the San Jose Mercury News reports.

Gov. Arnold Schwarzenegger (R) commissioned the study, which was prepared by graduate students at the Stanford Institute for Economic Policy Research (Theriault, San Jose Mercury News, 4/5).

The study examined:

•The California Public Employees' Retirement System;
•The California State Teachers' Retirement System; and
•The University of California's retirement system (Walters, "Capitol Alert," Sacramento Bee, 4/5).
The three systems serve about 2.6 million retirees (Bussewitz, AP/Ventura County Star, 4/5).

Report Details

The Stanford report estimates that California's shortfall for government pensions and health care benefits is about $535 billion (Anderson, Contra Costa Times, 4/5).

Researchers tallied CalPERS' unfunded liabilities at $239.7 billion and CalSTRS' liabilities at $156.7 billion.

The new figures are significantly higher than previous estimates from the pension funds. In July 2008, CalPERS estimated its unfunded liabilities at $38.6 billion and CalSTRS estimated its liabilities at $16.2 billion (AP/Ventura County Star, 4/5).

Pension Liabilities Could Lead To Health Cuts, Other Changes

The Stanford report suggests that California would need to put $360 billion into its pension and health benefit systems immediately to have an 80% chance of meeting 80% of the obligations within 16 years (Contra Costa Times, 4/5).

Schwarzenegger in a statement said the study "reinforces the immediate need to address our staggering pension debt." He added, "The consequences are clear: increasingly large portions of state funding for programs Californians hold dear such as schools, parks and health care will be diverted to pay for this debt."

The governor previously has proposed tightening eligibility requirements for retiree health care benefits and other changes to the pension system (AP/Ventura County Star, 4/5).

The new report echoes some of Schwarzenegger's proposals and calls for lawmakers to:


•Reduce benefits for new public employees;
•Raise annual pension contributions; and
•Shift workers into a partial 401k benefit plan (San Jose Mercury News, 4/5).

Heh. It's shennanigans like this that make me glad I opted for the 403b rather than the O(hio)PERS pension. I have no idea about what the fiscal state of OPERS is or will be, but it doesn't affect me!

Do you pay taxes in Ohio? Is your local economy effected by the tax burden? As a citizen, are you responsible for making up your state's deficit?

Yeah, I should have been more specific -- it doesn't affect my retirement accounts.

If it effects your earnings, your employers earnings, the value of the money used to pay you, and the ability of your employers ability to employ you then it effects your retirement accounts.

My point here was not to critique you, but to remind you.

Which, frankly, tends to be the case, DE, in a market environment. It does get to a point where it becomes silly to talk about, though, as the effect is diluted enough by either scale or degrees of removal. Talking about how California hiring another janitor is devaluing my currency because they're going bankrupt as is and thus will be bailed out by the Fed with printed money is.. perhaps not a useful topic of conversation when a Glader posts a thread celebrating his new job after months of unemployment, for instance. =)

Given that there is but one degree of seperation, a chain that isn't exactly had to follow, I think you are being obtuse.

Let the state go bankrupt and force all the public sector unions to renegotiate contracts from a blank slate. If they won't agree - the state simply goes non-union.

How the heck do you underfund pensions by 500 billion dollars anyway?

How the heck do you underfund pensions by 500 billion dollars anyway?

Is there still a possibility of things turning around and that money being gained back?
It sounds like renegotiating contracts is their only option but thats not fair to everyone who put all that money in.

So does that mean they actually lost 500 bil, or they just didn't get the 500 bil they were expecting? Because to me, that's a big difference.

Is there still a possibility of things turning around and that money being gained back?

So does that mean they actually lost 500 bil, or they just didn't get the 500 bil they were expecting? Because to me, that's a big difference.