well, maybe not yet. but you had better be nervous. gotta love when government and union mixes togehter
State pension shortfall totals $535 billion
By Troy Anderson, Staff Writer
Updated: 04/05/2010 07:36:50 PM PDT
California's public retirement plans are underfunded by more than a half trillion dollars, equal to about $36,000 per household and far exceeding previous estimates, according to a report released today by Stanford University.
In the policy brief, the Stanford Institute for Economic Policy Research warns $360 billion would have to be injected into pension and health care benefit systems immediately just to have an 80 percent chance of meeting 80 percent of the obligations in 16 years.
The report also predicts there is a 44 percent chance the California Public Employees Retirement System (CalPERS) alone will have a shortfall of more than $250 billion over the next 16 years.
Joe Nation, co-author of the report and director of the graduate student practicum in public policy at Stanford, said the magnitude of the shortfall is much greater than what many economists had expected.
"It is such a gargantuan number," Nation said. "If you have a state budget general fund of $85 billion, and you are short a half a trillion dollars, it's going to be very tough to make up that shortfall."
In recent years, California Foundation for Fiscal Responsibility, which has spearheaded several pension reform measures, has estimated the shortfall for government pensions and health care benefits
is about $300 billion. But foundation President Marcia Fritz said Stanford's estimate is probably more accurate because elected officials have boosted benefits while underfunding the systems for decades.
Fritz said the $535 billion shortfall estimated by the Stanford report means every household in the state is on the hook for about $36,000.
"That's how much they owe to government workers for their retirement benefits," Fritz said.
"It's not like they will have to send a check to pay for it. But they will see it in higher classroom sizes, roads that aren't repaired, parks that are closed, fewer policemen, far fewer firefighters and government offices that are probably going to be closed even more than we are seeing today."
Representatives from CalPERS and the California State Teachers' Retirement System (CalSTRS) did not return calls for comment.
Jon Coupal, president of the Howard Jarvis Taxpayers Association, said he isn't surprised by Stanford's estimate.
"This is the ticking time bomb that fiscal conservatives have been identifying for a decade now," Coupal said. "As soon as (former Gov.) Gray Davis granted those enhanced pension benefits, we've been like the Cassandra who warns everybody, but whose words are not heeded.
"And still, even right now, the Legislature is returning from its Easter break and they should change the rules by statute today. But they won't because there are too many powerful special interests invested in the status quo."
In the brief, Nation and five of his graduate students wrote that the CalPERS, CalSTRS and the University of California Retirement System had an adjusted funding shortfall of $425 billion in July 1, 2008. Since then, the funds have lost an additional $110 billion in value.
"The study found that previously published figures about California's pensions really don't tell the truth of the story of how underfunded the pension systems are now," said Cameron Percy, a Stanford graduate student and co-author of the report.
As a way to begin addressing the shortfall, the authors recommend elected officials take several steps, including steady contributions, rather than the erratic ones some funds have chosen; managing assets in a way that limits volatility; and setting sustainable benefit levels through a hybrid 401k/defined benefit plan.
"As pensions take up a larger and larger share of the general fund, that means there will be less money for everything else," Nation said. "Everything else will be squeezed out. If you care about higher education, the outlook is grim. If you want more money for environmental protection, it will be tougher because of these pension pressures.
"These pension obligations will squeeze out all these other things that people care about."
State pension shortfall totals $535 billion
By Troy Anderson, Staff Writer
Updated: 04/05/2010 07:36:50 PM PDT
California's public retirement plans are underfunded by more than a half trillion dollars, equal to about $36,000 per household and far exceeding previous estimates, according to a report released today by Stanford University.
In the policy brief, the Stanford Institute for Economic Policy Research warns $360 billion would have to be injected into pension and health care benefit systems immediately just to have an 80 percent chance of meeting 80 percent of the obligations in 16 years.
The report also predicts there is a 44 percent chance the California Public Employees Retirement System (CalPERS) alone will have a shortfall of more than $250 billion over the next 16 years.
Joe Nation, co-author of the report and director of the graduate student practicum in public policy at Stanford, said the magnitude of the shortfall is much greater than what many economists had expected.
"It is such a gargantuan number," Nation said. "If you have a state budget general fund of $85 billion, and you are short a half a trillion dollars, it's going to be very tough to make up that shortfall."
In recent years, California Foundation for Fiscal Responsibility, which has spearheaded several pension reform measures, has estimated the shortfall for government pensions and health care benefits
is about $300 billion. But foundation President Marcia Fritz said Stanford's estimate is probably more accurate because elected officials have boosted benefits while underfunding the systems for decades.
Fritz said the $535 billion shortfall estimated by the Stanford report means every household in the state is on the hook for about $36,000.
"That's how much they owe to government workers for their retirement benefits," Fritz said.
"It's not like they will have to send a check to pay for it. But they will see it in higher classroom sizes, roads that aren't repaired, parks that are closed, fewer policemen, far fewer firefighters and government offices that are probably going to be closed even more than we are seeing today."
Representatives from CalPERS and the California State Teachers' Retirement System (CalSTRS) did not return calls for comment.
Jon Coupal, president of the Howard Jarvis Taxpayers Association, said he isn't surprised by Stanford's estimate.
"This is the ticking time bomb that fiscal conservatives have been identifying for a decade now," Coupal said. "As soon as (former Gov.) Gray Davis granted those enhanced pension benefits, we've been like the Cassandra who warns everybody, but whose words are not heeded.
"And still, even right now, the Legislature is returning from its Easter break and they should change the rules by statute today. But they won't because there are too many powerful special interests invested in the status quo."
In the brief, Nation and five of his graduate students wrote that the CalPERS, CalSTRS and the University of California Retirement System had an adjusted funding shortfall of $425 billion in July 1, 2008. Since then, the funds have lost an additional $110 billion in value.
"The study found that previously published figures about California's pensions really don't tell the truth of the story of how underfunded the pension systems are now," said Cameron Percy, a Stanford graduate student and co-author of the report.
As a way to begin addressing the shortfall, the authors recommend elected officials take several steps, including steady contributions, rather than the erratic ones some funds have chosen; managing assets in a way that limits volatility; and setting sustainable benefit levels through a hybrid 401k/defined benefit plan.
"As pensions take up a larger and larger share of the general fund, that means there will be less money for everything else," Nation said. "Everything else will be squeezed out. If you care about higher education, the outlook is grim. If you want more money for environmental protection, it will be tougher because of these pension pressures.
"These pension obligations will squeeze out all these other things that people care about."
