The Trillion Dollar Gap: California

Underfunded State Retirement Systems and the Roads to Reform

The Trillion Dollar Gap: California

California needs to improve how it manages its long-term liabilities for both pensions and retiree health care and other benefits. From 1997 through 2001, the state consistently met its actuarially required pension contributions; since 2002, however, it has not made this payment in full.

Overall, California's pension plans are 87 percent funded—above the 80 percent benchmark that the U.S. Government Accountability Office says is preferred by experts—but the results for individual plans vary.

In 2008, the California Public Employees' Retirement System paid its entire actuarially required contribution of $7.2 billion, but the California State Teachers' Retirement System contributed less than two-thirds of its $4.3 billion obligation. Meanwhile, the state has set aside only $3 million to cover the $62 billion, long-term liability for retiree health care and other benefits. In the face of California's fiscal crisis, addressing this bill coming due will be a daunting challenge.