California is witnessing a significant increase in the number of high-priced public pensioners, with nearly 80,000 retirees now receiving annual pensions of $100,000 or more. This marks an 85 percent increase since 2013, highlighting the escalating costs associated with public pensions in the state.
The California Public Employees' Retirement System (CalPERS) and the California State Teachers' Retirement System (CalSTRS) are grappling with substantial unfunded liabilities.
More generous-than-expected raises for California state workers are nudging up the cost of public employee pensions, according to the California Public Employees’ Retirement System.
But, for one year, Gov. Gavin Newsom has a plan to save some money that otherwise would have to… pic.twitter.com/Y3ZefQENln— Mike Netter (@nettermike) April 16, 2024
CalPERS alone faces a funding gap exceeding $138.9 billion, while CalSTRS reports a shortfall of over $107.3 billion. These figures have grown significantly due to lowered assumptions for investment returns and demographic shifts, such as an increasing number of retirees and declining birth rates.
The employer contributions required to sustain these pension systems are projected to double by 2024. In 2018, state and local governments contributed $31 billion to these systems, a figure expected to rise to $59 billion by 2024. This surge in contributions is a response to the growing unfunded liabilities and the need to ensure the financial health of the pension funds.
“Remarkably, the average retirement benefit distributed by California’s public pension funds is nearly five times greater than comparable Social Security benefits.”
Complete utter BS. Why are public taxpayers paying for this?? pic.twitter.com/B2h6MonaGV
— Julie Chang (@JulieChangRE) May 11, 2024
California's pension system covers a broad spectrum of public employees, including state, school, and public agency members. Currently, nearly one in nine Californians is a member of a public pension program. The increasing number of retirees drawing high pensions is putting additional strain on the state's finances, prompting calls for reforms to address these escalating costs.
The impact of these rising pension costs is felt acutely at the local government level. Many cities and counties are experiencing fiscal distress, with pension contributions consuming an ever-larger portion of their budgets. For example, pension contributions in Stockton rose from $6.8 million in 2002 to $41.5 million in 2017. This trend is expected to continue, with pension costs projected to consume up to 16 percent of general fund budgets by 2024-25.
Efforts to reform California's public pension system include the Public Employees' Pension Reform Act (PEPRA) of 2013, which aimed to reduce benefits, increase contributions, and delay retirement ages for new employees. Despite these measures, the financial challenges persist, exacerbated by the longer life expectancies of retirees and the declining ratio of active workers to retirees.
As the state grapples with these pension challenges, the financial burden on taxpayers continues to grow. The substantial payouts to retirees, particularly those in the $100,000-plus category, underscore the need for ongoing scrutiny and potential reforms to ensure the sustainability of California's public pension system.
