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ERIC Number: ED517459
Record Type: Non-Journal
Publication Date: 2010-Oct
Pages: 24
Abstractor: ERIC
Reference Count: N/A
Trouble Brewing: The Disaster of California State Pensions. State Research
Buck, Stuart
Foundation for Educational Choice
California has promised its public employees lavish pensions and retiree health benefits without setting aside nearly enough money to pay for those benefits. As a result, California already admits to a $75.5 billion shortfall in paying for these promises to public employees--$40.5 billion for the teachers' retirement plan (California State Teachers' Retirement System, or CalSTRS) and $35 billion for the California Public Employee Retirement System (CalPERS). This shortfall has grown so large because elected officials preferred the hidden cost of higher retirement benefits to the visible cost of higher wages. For instance, a recent report from the Reason Foundation noted that thanks to a 1999 pension bill radically increasing benefits, "there are 9,111 state and local government retirees in California, such as police officers, firefighters and prison guards, who receive pensions of at least $100,000 a year (through CalPERS), and an additional 3,065 retired teachers and school administrators who receive pensions of over $100,000 a year (through CalSTRS)." As a California pension recipient told "Forbes" last year, "It's just taxpayers' money, so nobody cares." In this paper, the author re-estimates California's pension obligations using a discount rate approximating what private pensions are allowed to use. With this more realistic assumption, California's unfunded pension liabilities--i.e., the gap between existing plan assets and the present value of benefits accrued by participants--actually reach $282.2 billion, a figure that rises to $326.6 billion when current market values are taken into account. On top of that, the California Controller estimates that retiree health benefits are currently underfunded by $51.8 billion. The author concludes by recommending policy actions that California can take to address its pension liabilities. (Contains 3 figures and 34 notes.) [For related reports, see "Trouble Brewing in San Francisco. Policy Brief" (ED517460); "Trouble Brewing in Orange County. Policy Brief" (ED517462); "Trouble Brewing in San Diego. Policy Brief" (ED517463); and "Trouble Brewing in Los Angeles. Policy Brief" (ED517461).]
Foundation for Educational Choice. One American Square Suite 2420, Indianapolis, IN 46282. Tel: 317-681-0745; Fax: 317-681-0945; e-mail:; Web site:
Publication Type: Reports - Evaluative
Education Level: N/A
Audience: N/A
Language: English
Sponsor: N/A
Authoring Institution: Foundation for Educational Choice
Identifiers - Location: California