California state pension funds going broke, Stanford study finds
New calculations by Stanford graduate students show that California's three main public employee pension funds are in more dire financial trouble than previously believed.
L.A. Cicero
Students Howard Bornstein and Lisha Wang spoke with reporters after a news conference where they and the other members of their research group announced their findings about the state retirement system.
BY GWYNETH DICKEY
California public employee pension systems are worse off than anyone previously projected, according to a new report generated by five graduate students in Stanford's Graduate Public Policy Program. The result could be greater pressure on the state budget and a shortage of pension funds in the future.
"This is a really dire situation," graduate student Howard Bornstein said today at a press conference at the Stanford Institute for Economic Policy Research, which is publishing the students' findings. "If we don't do something now, we're going to have major issues in just a few years."
Bornstein and his fellow graduate students examined public records of past performance of three pension funds – the California Public Employee's Retirement System (CalPERS), the California State Teachers' Retirement System (CalSTRS), and the University of California Retirement System (UCRS), which together administer pensions for approximately 2.6 million Californians.
The students ran computer simulations to predict the unfunded liabilities of the pension funds over the next 16 years.
Major investment needed
"The simulation shows that the state would need to invest more than $200 billion, and possibly as much as $350 billion, today to return the fund to a minimum responsible level of funding," said Bornstein, who noted that the figure is approximately four times the current state budget.
"It's an enormous number," said Joe Nation, a public policy lecturer at SIEPR and the advisor for the research team. He said it's important to look at the shortfall relative to state resources. Pension funds fluctuate with market performance, but state employees are guaranteed a fixed pension