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).
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).