Coming up Short: Stanford Study Says Local Pension Systems over $130 Billion in Debt
A new report from Stanford University has examined the 24 largest independent pension systems in California and has found that local public pensions (outside of CalPERS) are facing $135.7 billion in long-term obligations. These numbers are based on an assumed rate of investment return of 5 percent. The following counties were covered in the research: Alameda, Contra Costa, Fresno, Kern, Los Angeles, Orange, Sacramento, San Diego, San Francisco, San Joaquin, San Mateo, Santa Barbara, Sonoma, Stanislaus and Ventura.
For non-CalPERS pension systems, it was found that the average funded ratio is 53.6 percent. The study notes that between 1999 and 2010, pension spending grew at 11.4 percent per year, more than the rate of growth for any other expenditure category. The report predicts that such growth will continue and exert pressure on spending in other categories. On average, 10 cents of every dollar is spent on covering pension costs for the state’s biggest local governments.
The study is authored by Stanford professor and former Assemblyman Joe Nation and was released under the Stanford Institute for Economic Policy Research (SIEPR) and California Common Sense (CACS).
Here are some key findings:
- “The June 2011 funded ratio for the aggregated 24 systems is 53.6 percent, based on an assumed rate of return, or discount rate, of 5%. This is higher than the 45.1 percent estimated under the same assumptions for CalPERS.
- The City of Fresno's two systems have an aggregate funded ratio of 78.5 percent, while the Kern County system is only 41.5 percent funded. None of the systems is at or above 80 percent funded, which is the conventional benchmark for the minimum funded ratio.
- Benefit levels vary significantly. The average annual pension benefit in 2009-2010 for miscellaneous members was $34,461; for safety members, it was $67,718. This includes all beneficiaries, regardless of the number of years of service.
- For retired miscellaneous employees, the highest annual average benefit in 2009-2010 was $46,211 in Los Angeles City, and the lowest is $24,179 in Stanislaus County.
- A majority of independent systems base final average salary on the last one year of work, while a minority base it on the final three years. All systems contain some form of cost of living adjustment.
- Average benefits for retired safety employees range from a low of $48,732 in Fresno County to $90,612 in the City of San Jose
You can read the full study here or below:
