mead cohen berger shevtsova garfinkle michta grygiel blankenhorn
No Fun for Funds
California’s Grim Pension Stats

California’s pension woes have been national news for a while, but now, thanks to state Controller John Chiang, the dismal figures are compiled in one place for all to see. And dismal barely begins to cover it, according to the AP:

A decade of financial data posted by Controller John Chiang on his open-data website,, shows that the state’s 130 public pension systems are carrying $198 billion in unfunded liability in 2013, compared with $6.3 billion of unfunded liability in 2003.

The systems run by the state, cities and other government agencies range from the nation’s largest public pension system, the California Public Employees’ Retirement System (CalPERS) with $281.1 billion in assets in 2013, to the smallest, the City of Pittsburg Miscellaneous Employees’ Retirement System of 1962, with assets of less than $9,000. […]

The controller warns that many of the state’s public pension systems are unhealthy. In 2013, there were 17 plans that were underfunded by at least 40 percent, and another 45 were funded between 60 and 80 percent. Only 22 were funded at over 80 percent, the benchmark often used to measure solvency.

Here’s the extraordinary explosion of California’s unfunded liability in one graph:

People forget (or hate to acknowledge) how bad the country’s pension crisis is, but if anything, the figures they would rather not see are still too optimistic. As Dan Walters of the Sacramento Bee notes, all of Chiang’s figures are based on the current, official asset-earnings rate of 7.5 percent. But that’s almost certainly too high, perhaps drastically so. When CalSTRS (the teachers’ pension fund) decided to reduce its assumed earnings from 7.75 to 7.5, analysts told the fund’s board to expect less than 7 percent for the next 10 years. LACERA (Los Angeles’s public employee pension fund) also dropped its assumption from 7.75 to 7.5 percent last month, though a city commission convened by the mayor had suggested 6 percent might be more advisable. The city’s budget overseer protested that such a low rate would add a staggering amount to LA’s debt load—$566 million.

Walters describes Chiang’s new addition to his website as a “bombshell”—and it is, because it gives easy access to numbers normally buried in a labyrinth of spreadsheets. The average voter will be able to figure out exactly how badly off her city’s pensions are, and perhaps vote accordingly. As they might say, the truth may first be painful, but then it sets you free.

Features Icon
show comments
  • Anthony

    This pension issue (Municipal) has not arisen whole cloth (and even though Steve Malanga has written about it for a couple of years now) and represents human character flaws (self interest greed perhaps or callous indifference) given leeway and discretion at expense of “national commons”. Real people (elected officials, interested parties – unions, police officers, firemen – , Governors, Mayors, Legislatures, Bankers, Investment Houses, Trustees, etc.) are/were complicit. This has not magically appeared!

  • Andrew Allison

    The Citibank Liability Index, the rate that represents the “risk free” rate of return for a pension fund (the rate that Moody’s Investor Services, joined by the Government Accounting Standards Board, intends to require government agencies to use when calculating their pension liability) is currently 4.19 percent. In other words, the unfunded liability is very much greater than advertized. Meanwhile, MSM reports to the contrary, the State is actually running a deficit (
    It should be obvious but, given people’s desire to avoid unpleasant facts, is worth stating explicitly that there is no way that that obligations representing, at a guess, close to five times the State’s annual revenue can be fulfilled. And that’s just for pensions! In 2013, California’s per capita state debt was $20,449. By any objective accounting measure, California is bankrupt.

  • Josephbleau

    The. Problem did not magically appear and will not magically disappear. The legislature is captured by the ability to promise gain to voters with no consequence. Someday a poor governor will have to stand on the Capitol steps and say “sorry folks, but…”

    • FriendlyGoat

      Cute sound bite, “the sad immorality of the caring class”. That one should be repeated in every pulpit in America, just as an experiment to see whether the church people now all want to run away from seeing themselves as the “caring class”—-seeing as how you have now “trademarked” the term to mean something else.

  • FriendlyGoat

    Dear TAI: Your last sentence is tasteless—-because you are borrowing a spiritual concept to make a questionable political point. You guys usually do better than this kind of junk we’d only expect from talk radio.

  • Daniel Nylen

    Public funded and guaranteed by the state is so many ways, especially if it is a state run system (how does a state file for bankruptcy?), the problem will grow worse until …when? My two cents… just a guesss–for most pensioners they can wait it out collecting their big bucks. It can and will get worse for the taxpayers, but the politics will allow a solution besides seizing the least connected politically groups money for a couple of decades or so.

© The American Interest LLC 2005-2016 About Us Masthead Submissions Advertise Customer Service