The State Worker
Chronicling civil-service life for California state workers
December 13, 2011

California’s three largest pension systems have promised $500 billion beyond their current ability to make those payments to retirees, according to a study released to today by Stanford University Professor and former Democratic Assemblyman Joe Nation and a student researcher.

The Stanford Institute for Economic Policy Research issued the report, documenting what it claims is the state’s deepening pension crisis. California Common Sense, an organization dedicated to engaging the public in “data-driven discourse” is also behind the report.

Among the report’s findings for CalPERS, CalSTRS and the University of California Retirement Plan:

Using a “risk-free” or low-risk discount rate — a method that is debated when experts talk about figuring out a pension system’s obligations — the total unfunded liability for CalPERS, CalSTRS, and the UC system is $498 billion. That’s up 17 percent higher than the $425 billion shortfall Stanford estimated in April 2010.

If you assume an investment rate of return of 6.2 percent for CalPERS, CalSTRS, and UCRP, the shortfall is nearly $300 billion, assuming future investment rates of return of 6.2 percent. Even if the three systems earn 7.75 percent (CalPERS, CalSTRS) and 7.5 percent (UCRP) per year, the shortfall is $142.6 billion, or nearly $12,000 per California household.

Public agency contribution rates will probably double or even triple, crowding out education and social services spending. The state’s general fund pension costs will probably likely to rise from its current 5.7 percent share than 17 percent.

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