(The Center Square) — California has more unfunded pension liabilities than any other state in the country, according to a new report released this week.
The reportpublished by the American Legislative Exchange Council (ALEC), found that national unfunded pension liabilities soared to $8.28 trillion, “or just under $25,000 for every man, woman and child in the United States”.
The report found that California has the largest amount of unfunded pension liabilities of any state, totaling more than $1.5 trillion.
This amount is a rough estimate of how much the average retiree will receive over their projected length of retirement life, also considering the number of retirees, active workers and beneficiaries. After subtracting the pension assets and the expected investment return, we get the unfunded actuarial liability. It does not include other retirement benefits such as state-paid health care.
According Ballot, there were 82 public pension systems in California in 2020. Of these, 10 were state-level programs and 72 were locally administered. In 2020, more than 4.4 million Californians were members of the various retirement systems, according to Ballotpedia.
The ALEC report looked at 290 state-administered pension plans across the country and their assets and liabilities from fiscal years 2012 through 2020.
The California Public Employees Retirement System (CalPERS) and California Teachers Retirement System (CalSTRS) are the two largest retirement systems in the nation. The pension funds have a combined portfolio of more than $570 billion and count 2.7 million Californians among their members, according to the state. comptroller’s office.
CalPERS was 70.6% funded as of June 30, 2020 and had $163 billion in unfunded liabilities, while CalSTRS was 67% funded with $106 billion in unfunded liabilities as of June 30, 2021, according to the Reason Foundation. In November, CalPERS announced changes it would force some public sector employees in California to pay more of their salaries in retirement.
No state in the country has fully funded its pension plans. Wisconsin has the highest funded ratio in the nation at 56%, while New Jersey has the lowest at less than 18%.
The health of pension funding is important not only to fund participants, but also to taxpayers who contribute the lion’s share of funding. A poorly funded pension will require more taxpayer dollars in annual contributions, crowding out other priorities.
The ALEC report calls for “sound pension reform,” saying “poor assumptions, promising benefits, the search for returns and political investment strategies plague public pensions across the country.”
California has made efforts to reform its retirement system through the California Public Employees Pension Reform Act of 2013. The law came into effect on January 1, 2013 and imposed compensation limits on members.
One of these limitations governs the “spike” of pensions, which involves a public sector employee adding more responsibilities or working overtime in the later years of their employment to inflate the amount they should receive. in annual pension fund benefits.