Study lists California pensions’ shortfall at $500 billion

December 14, 2011

California’s three largest pension systems are on the hook for $500 billion beyond their current ability to pay retirees, according to a study released Tuesday by Stanford University Professor and former Democratic Assemblyman Joe Nation and a student researcher. [SacramentoBee]

The Stanford Institute for Economic Policy Research issued the report about CalPERS, CalSTRS and the University of California Retirement Plan documenting what it claims is the state’s deepening pension crisis. The report found the three pension systems shortfalls have risen 15 percent since a Stanford estimate of $425 billion in April 2010.

The annual cost to the state of delaying pension solutions is $3.4 million per day, the report said.

In 2010, a Stanford institute study commissioned by then-Gov. Arnold Schwarzenegger concluded CalPERS, CalSTRS and the UC pension system were carrying a collective $500 billion in unfunded liabilities.

Both the pension systems and public employee unions disputed the assumptions, methodology and conclusions of the 2010 study. Labor called it a partisan hit piece aimed at fueling the anti-public pension agenda.


21 Comments

  1. slomike says:

    You have to love irony. How many in the GOP (or anybody!) wouldn’t take whatever they can get?

    Perry Retires But Remains Governor
    Texas Gov. Rick Perry (R) “has finally retired, but it’s not what you think: The governor has officially retired as a state employee, but gets to keep working as Texas governor. The maneuver, perfectly legal according to his campaign, has dramatically boosted his take home pay,” the Texas Tribune reports.

    “Perry makes a $150,000 gross salary as Texas governor. Now, thanks to his early retirement, Perry, 61, gets a monthly retirement annuity of $7,698 before taxes, or $6,588 net. That raises his gross salary to more than $240,000.”

    Like or Dislike: Thumb up 1 Thumb down 3

  2. MikeKnecht says:

    What is interesting is that this train wreck, which is huge beyond belief, was caused by the the rating agencies giving AAA ratings to bundled mortgage securites. That blatant lie allowed CALPERS to invest in those securitized mortgages. Now two million houses have been foreclosed on and four point two million are behind on mortgage payments nationwide. When CALPERS tells a bunch of retired law enforcement officers and firefighters in thier sixties and seventies that there is no pension money to pay them then the ranks of the homeless are going to increase.
    I don’t have any personal knowledge of other banks but I do know Bank of America isn’t following the legal requirements needed to foreclose when they placed houses up for auction a few weeks ago. Is the SLO Sheriffs office really going to throw retired law enforcement personal out of their houses because their pension payments have stopped? Are the banks ever going to follow the legal requirements needed to lawfully put people on the street? Are any of the rating agency higher ups that lied and allowed this mess to happen going to go to jail or will they just keep collecting their million dollar bonuses along with bank executives?

    Like or Dislike: Thumb up 2 Thumb down 0

  3. SanSimeonSam says:

    Perfect time for the state to file chapter 11, 12 13 and probably a few more. Then we can restructure and get the state employees off of the welfare system and let them join the real world. Then maybe we can open the state parks again…..So did they really close them…..What does it mean to close a state park. Did they rope off our land ? Hey lets sell the park land to the Arabs and Japanese and use the money to pay off the pension debt of the freeloaders. Thats a good idea, or maybe only allow out of state students into the UC system so we can collect higher tuition fees. Better yet, only foreign students need apply.

    Like or Dislike: Thumb up 4 Thumb down 5

  4. sloweb says:

    Let me quote some French guy on August 20 1786, when French Finance Minister Calonne informed King Louis that the royal finances are insolvent:

    “Quelle Surprise!!”

    And oh yeah, that was pretty much the beginning of the French Revolution. And we all know what happened back then, right?

    Like or Dislike: Thumb up 6 Thumb down 0

    • The Gimlet Eye says:

      Yes, indeed. The French Revolution was largely over the bankruptcy of the government because of its huge war debts (French and Indian War and American Revolution) and the “solution” of printing fiat paper money to make the country “solvent” and grease the wheels of the economy. They thought that they had solved the problems which had cause the financial debacle back in 1720 with John Law and his advice to print paper money to cover debts (also cause by prolonged and repeated wars, if I remember correctly).

      It didn’t work.

      An excellent, extraordinary little book which explains all this is Fiat Money Inflation in France, by Andrew Dickson White. It’s free on Kindle and at http://mises.org/

      Like or Dislike: Thumb up 6 Thumb down 0

  5. scapegoat says:

    Another biased study that means nothing.

    http://www.calpersresponds.com/issues.php/stanford-pension-study

    Like or Dislike: Thumb up 8 Thumb down 9

    • BeenThereDoneThat says:

      Quote from link…..

      •”As of the most recent fiscal year end, the Fund earned a 21.7 rate of return and gained back $60.8 billion from the recent 2009 low of $181 billion. CalPERS assets currently stand at more than $224 billion”.

      Lets see. 224 billion-181 billion = 43 billion. $60.8 billion??????? Sounds like the math is a little fuzzy here. Hmm and I should trust Cal-pers and your word? I think not. Now get back to work before your union boss sees you.

      Like or Dislike: Thumb up 9 Thumb down 7

  6. mrcyberdoc says:

    Wow, another study… hope it didn’t cost the tax payers anything. ALL that information is available on the CalPers website. Ratio of assets to liabilities. As reported in 6/2007 that ratio was 96.6% for state employees and 107% for school employees. Actually the ratio has improved over this past year , after taking a big hit by the spiraling state economy, by 4% for both school and state employees to 69.5% & 62.8% reported between 6/2009 & 6/2010. There isn’t a retirement system in the country that doesn’t pay out to retirees from contributions made by both the employer & employee currently employeed. CalPers has done remarkably well in their investments compared by the overall economy. The return on todays investments for the most part are a reflection of the world economy. If you want to pick on an unfunded “retirement” system, just look at social security. It was a good idea when implimented. The demise of Social Security is due to all the added benefits that our government has attached to it over the years. Have you ever seen a “reform” by our government that hasn’t been a disaster. I rememer when the state tried to “borrow” money from the retirement system because they were mismanaging their budget even 15=20 years ago.

    Like or Dislike: Thumb up 15 Thumb down 1

    • The Gimlet Eye says:

      “The demise of Social Security is due to all the added benefits that our government has attached to it over the years”?

      I thought the problem was that it was a “ponzi scheme.”

      Like or Dislike: Thumb up 7 Thumb down 1

  7. r0y says:

    …and this is now news? Haven’t certain “types” of people been screaming this for years now? What, we have to actually wait until checks bounce (or stop being issued) before we listen?

    I knew the CalPERS was bound for insolvency when I heard much of it was tied into commercial real estate investments. You think the residential market is having troubles? Check out the commercial market.

    Austerity is coming, whether we like it or not.

    Like or Dislike: Thumb up 15 Thumb down 4

  8. BeenThereDoneThat says:

    O.k. so we get the same responce from unions every time that this is a partisan hit piece. Fair enough. The one side provided their numbers, so to the employee unions I say where are your numbers to dispute this???

    Like or Dislike: Thumb up 14 Thumb down 4

    • r0y says:

      Public employees should NEVER have been allowed to unionize. There is no collective bargaining, as there is no representative of the payer sitting across from the payees. I don’t ever remember anyone asking me, my neighbors, or any of my fellow tax payers anything about any of the negotiations…

      One of the only times I can think of where I agree with F.D.R. when he said, “It is impossible to bargain collectively with the government.” (read his letter opposing unions in government if you like…

      Like or Dislike: Thumb up 20 Thumb down 8

      • srichison says:

        Don’t get me wrong, I believe in pension reform. However, when there is misinformation, it must be corrected, regardless of the “side.” You do have a representative of the payer in collective bargaining – it’s called the school board in the case of the local school district. You get to replace your represenatives every two to four years if they don’t represent you well. In terms of the requirements imposed on school districts regarding what they contribute to employee pensions and what they collect from the employees (and send to the state), that isn’t a subject of local collective bargaining, not any other form of collective bargaining. That is a function of the legislature. Don’t like the contribution rates or splits? Change the legislature.

        Like or Dislike: Thumb up 4 Thumb down 3

      • mrcyberdoc says:

        As a long time staff employee of Cal Poly (35+ years) I can say without reservation that the MAJORITY OF THE STAFF did NOT want to unionize. It was forced on us by the state of California! Even after the union started representing the different staff areas we were given the option of not joining the union or paying anything into it. I think only about 20% of the staff opted to pay anything toward their “fair share” or union dues. After 10+ years the unions started crying poor mouth that they were representing all the staff, but only a portion were paying into the fund. The state again stepped in and said we would be forced to pay our “fair share” into the union which was About $3 less than if we wanted to “join” which I chose NEVER to do. The unions pitted the different units against each other, staff against faculty, etc., saying that each one wanted more of the pie than the other. Unions were the worst thing that ever happened to Cal Poly. We were treated more fairly and had better representation when we delt directly with the chancellors office.

        Like or Dislike: Thumb up 4 Thumb down 2

  9. NorCoMod says:

    So labor calls it a hit piece. Well then, how would labor propose to put it any differently? Of course they call it a hit piece, what else are they left with. They can’t dispute the facts.

    Anybody else read the large laundry list of proposed budget cuts in this morning’s Tribune? The entire list consisted of cuts to social services and schools. We continue to dismantle the fabric of our society while the public employee pensioners remain immune to the obvious.

    I know there’s an obligation to the public pensioners and even beginning the discussion of writing off any of the public pension unfinded liabilities brings screaming from the labor unions but we have to face up to the truth….we’re out of money. It really is that simple. You can discuss the reasons until the cows come home, whether it’s the continued unholy alliance between investment and commercial bankers, corporate greed, overregulation, bloated government, etc. Mucho reasons. But the bottom line is ….we’re out of money.
    That said, we will never have any change until we have campaign finance reform. remove the financial connection between special interest lobbyists and our legislators. Without breaking that connection, we will never have any change or hope.
    If you want to make a small personal statement about money in politics, the next time you’re asked to sign a petition on the street for any ballot initiative, ask the signature gatherer if he’s being paid to gather signatures. If his/her answer is yes, don’t sign it no matter what the petition is about.

    The discussion about cutting public pensions must start.

    Like or Dislike: Thumb up 20 Thumb down 3

    • r0y says:

      The only people who still listen to unions probably still listen to newscasts or read newspapers and believe what they see/read.

      Like or Dislike: Thumb up 14 Thumb down 8

    • scapegoat says:

      Discussion has started and concessions have been given back. Do some research please.

      Like or Dislike: Thumb up 9 Thumb down 12

      • NorCoMod says:

        You’re correct, discussions have started regarding second tier or new hire employees.

        But to the best of my knowledge, no discussions exist about modification of existing pensions and without that, it’s too little too late.

        Like or Dislike: Thumb up 15 Thumb down 5

        • srichison says:

          Those types of modifications are up to the legislature and governor, not collective bargaining at the local level. It may not be possible to modify existing pensions because of them being an essential part of the employment contract with the state when someone “hired on.”

          Like or Dislike: Thumb up 3 Thumb down 2

          • NorCoMod says:

            I agree, public pensions are a contract between the state government and the state employee. I also agree that any attempted change to those contracts must come from the legislature. And with the sanctified graft and corruption in our state government, it will never happen.

            But none of this changes the fact that we have no money. There is one way to change an employment contract however….bankruptcy. And if the state were a private entity, we would already be having that discussion.

            SLO County is in the same boat. It’s pension fund unfunded liability has been floated with pension obligation bonds. Our own local mess swept under the rug by our current board and left for our kids to repay. Don’t believe me, call Sibbach’s office and ask for your self. Maybe we’re all starting to wake up.

            Like or Dislike: Thumb up 8 Thumb down 0

    • The Gimlet Eye says:

      I prefer to cast aspersions in a different direction: Central Banking. The FED is the primary culprit, though there are many secondaries as well.

      CLOSE DOWN THE FED, OR WE WILL ALL WIND UP WEARING BARRELS!

      Like or Dislike: Thumb up 6 Thumb down 1

Comments are closed.