The 24 largest independent pension systems in California face a combined $135.7 billion in long-term obligations that they won't have the assets to cover, a new Stanford University report says.
Generally, experts consider an 80 percent funding ratio for public pensions' financial health, but that figure is greatly affected by what the funds—or in this case, Stanford researchers—assume its investments will return. Many pension systems assume they'll earn 7.5 percent or more.
The average funded ratio of all 24 systems outside of CalPERS is 53.6 percent, using the lower Stanford investment return assumption. The research covers Alameda, Contra Costa, Fresno, Kern, Los Angeles,Orange, Sacramento, San Diego, San Francisco, San Joaquin, San Mateo, Santa Barbara, Sonoma, Stanislaus, and Ventura counties. Cities whose pensions were examined include Fresno, Los Angeles, San Jose, and San Diego. The 24 systems account for more than 99 percent of independent system assets, Stanford says.
Between 1999 and 2010, the local municipalities' pension spending grew at 11.4 percent per year, more than the rate of growth for any other expenditure category, according to the report.
California Common Sense also sponsored the research by Stanford professor Joe Nation and student researcher Evan Storms. In December, Nation published a report that concluded California's three big statewide public pension systems have a combined $500 billion in unfunded liabilities. Public employee unions and CalPERS rejected Nation's conclusions.