Stanford researchers find that pension funds for California state workers are still in peril - action needed now
December 15, 2011 By Dan Stober
Almost two years ago, a Stanford study stirred up discussion statewide with the prediction that the pension funds of California's state workers were headed for a train wreck. The retirement system would eventually not have enough money to pay all that it owes to its retirees.
Since then, the picture has not improved, Joe Nation, a public policy expert at the Stanford Institute for Economic Policy Research, said Tuesday as he released a report on his latest research. "Perhaps surprisingly, the situation is even worse." The unfunded liabilities of the pension funds have increased by 15 to 20 percent.
All this could have a direct effect on state services as money is diverted to pay the pensioners. "That increased spending on pensions is virtually certain to continue to crowd out non-pension spending, including education and social services," the report warned.
The big state pension funds at the center of the huge financial problem are the California Public Employees' Retirement System (CalPERS), the California State Teachers' Retirement System (CalSTRS), and the University of California Retirement Plan (UCRP).
The combined unfunded liability for the three funds is $290.6 billion, presuming that the funds earn a 6.2 percent return from investments. That figure represents an unfunded amount per California household of nearly $24,000, Nation said.
Even if the retirement funds yield 7.75 percent, the situation would remain dangerous, he said.
The crisis was driven by pension funds that understated the costs of pension payouts and over-estimated the amount of money the funds would have in future years, Nation said. The strategy was, "If you can push costs off to the future, do it."
Board members of pension funds were typically not required to have any technical expertise. Contribution rates for employees were set too low – zero for some.
Any solution, Nation said, will have to involve current state workers: "There's just no way to solve this problem if that's not there." The cost to delay a solution for another year is $1.247 billion, or $3.4 million each day. The hope, he said, is that policymakers will step up and actually address the problem.
More information on the pension crisis will be released this week on the SIEPR website.
Provided by
Stanford University
-
From lemons to lemonade: Reaction uses carbon dioxide to make carbon-based semiconductor,
32 comments
-
Thioridazine kills cancer stem cells in human while avoiding toxic side-effects of conventional cancer treatments,
3 comments
-
SpaceX private rocket blasts off for space station (Update),
42 comments
-
Climate scientists say they have solved riddle of rising sea,
31 comments
-
SpaceX capsule has 'new car' smell, astronauts say (Update),
4 comments
-
Consumption rivalry
May 25, 2012
-
Bilateral trade between all countries
May 24, 2012
-
Is the economic foundation of social media in jeopardy?
May 20, 2012
-
Psychology: Rosenthal and Hawthorne Effect
May 15, 2012
-
Is GDP and National Income the Same Thing?
May 13, 2012
-
Difference between hourly wage and real GDP per hour worked?
May 12, 2012
- More from Physics Forums - Social Sciences
More news stories
Change in developmental timing was crucial in the evolutionary shift from dinosaurs to birds: study
At first glance, it's hard to see how a common house sparrow and a Tyrannosaurus Rex might have anything in common. After all, one is a bird that weighs less than an ounce, and the other is a dinosaur that ...
Other Sciences / Archaeology & Fossils
8 hours ago |
5 / 5 (5) |
0
|
Social welfare cuts ultimately come with heavy price, researchers say
(Phys.org) -- Slashing government funding for Medicaid, food stamps and other programs that serve the poor – while politically popular with some lawmakers and many conservatives – may do more harm ...
Other Sciences / Social Sciences
May 24, 2012 |
4.1 / 5 (22) |
155
Ancient Bethlehem seal unearthed in Jerusalem
Israeli archaeologists have discovered a 2,700-year-old seal that bears the inscription "Bethlehem," the Israel Antiquities Authority announced Wednesday, in what experts believe to be the oldest artifact ...
Other Sciences / Archaeology & Fossils
May 23, 2012 |
3.3 / 5 (15) |
24
Dollars and sense: Why are some people morally against tax?
As the U.S. presidential election campaigns heat up, the economic debate is dominated by bailouts, austerity and, inevitably, taxation. Now a new study published in Symbolic Interaction asks why tax is such an important issue ...
Other Sciences / Social Sciences
May 23, 2012 |
2.3 / 5 (3) |
19
Oldest Jewish archaeological evidence on the Iberian Peninsula
German archaeologists of the Friedrich Schiller University Jena found one of the oldest archaeological evidence so far of Jewish Culture on the Iberian Peninsula at an excavation site in the south of Portugal, ...
Other Sciences / Archaeology & Fossils
May 25, 2012 |
4.2 / 5 (6) |
12
Stunning image of smallest possible five-ringed structure
Scientists have created and imaged the smallest possible five-ringed structure – about 100,000 times thinner than a human hair – and you'll probably recognise its shape.
'Unzipped' carbon nanotubes could help energize fuel cells, batteries
Multi-walled carbon nanotubes riddled with defects and impurities on the outside could replace some of the expensive platinum catalysts used in fuel cells and metal-air batteries, according to scientists at ...
Computer model used to pinpoint prime materials for efficient carbon capture
When power plants begin capturing their carbon emissions to reduce greenhouse gases – and to most in the electric power industry, it's a question of when, not if – it will be an expensive undertaking.
T cells 'hunt' parasites like animal predators seek prey, study shows
By pairing an intimate knowledge of immune-system function with a deep understanding of statistical physics, a cross-disciplinary team at the University of Pennsylvania has arrived at a surprising finding: T cells use a movement ...
Land and sea species differ in climate change response: study
(Phys.org) -- Marine and terrestrial species will likely differ in their responses to climate warming, new research by Simon Fraser University and Australia’s University of Tasmania has found.
Yale study concludes public apathy over climate change unrelated to science literacy
Are members of the public divided about climate change because they don't understand the science behind it? If Americans knew more basic science and were more proficient in technical reasoning, would public consensus match ...
Dec 15, 2011
Rank: 1 / 5 (1)
What else is new?
That's what baby boomers have always done. It's why the federal government is broke too.
The whole "retire with 90% income" thing didn't seem too much maybe?
Anybody under 25 or 30 should leave california asap, so as to not become a permanent slave to the previous generation.
Dec 16, 2011
Rank: 1 / 5 (1)
Dec 16, 2011
Rank: not rated yet
The failure is the direct result of the "Me Me Me generation of Neo-Conservatvies" who have screwed up virtually everything they have got their hands on.