Stanford University Study States Cal Pensions Underfunded (bankrupt, live)

[NewToCA]

Some rather disturbing conclusions:

Adjusting the discount rate used on liabilities to a risk-free rate, we estimate the combined funding shortfall of CalPERS, CalSTRS, and UCRS prior to the 2008/2009 recession at $425.2 billion. At the time of this writing, the funds have not released more recent financial reports, but due to the previously mentioned $109.7 billion loss the threefunds collectively sustained, we estimate the current shortfall at more than half a trillion dollars.

http://siepr.stanford.edu/system/fil...orBroke_pb.pdf


That far exceeds our entire annual budget.

[mysticaltyger]

Originally Posted by NewToCA

Some rather disturbing conclusions:

Adjusting the discount rate used on liabilities to a risk-free rate, we estimate the combined funding shortfall of CalPERS, CalSTRS, and UCRS prior to the 2008/2009 recession at $425.2 billion. At the time of this writing, the funds have not released more recent financial reports, but due to the previously mentioned $109.7 billion loss the threefunds collectively sustained, we estimate the current shortfall at more than half a trillion dollars.

http://siepr.stanford.edu/system/fil...orBroke_pb.pdf


That far exceeds our entire annual budget.

Problem is, people who have their eyes open already know this & know the pensions could bust the state. People who don't will ignore or minimize this fact.

[bellalunatic]

Originally Posted by mysticaltyger

Problem is, people who have their eyes open already know this & know the pensions could bust the state. People who don't will ignore or minimize this fact.

Amen.
And the blind citizens (which is pretty much most of them) who think their local government is trying their best to 'help' them by pushing through certain businesses for development and building for the 'community' good, are OBLIVIOUS to the fact that the contracting businesses are invetested into the CALPERS REIT.

[DMenscha]

CAlPers has an answer to the Stanford study on their website.

CalPERS Responds to Stanford Policy Brief on Public Pension Funds

[NewToCA]

I'll be intested to see if the Stanford staff responds to CalPERS.

[Curmudgeon]

Originally Posted by NewToCA

I'll be intested to see if the Stanford staff responds to CalPERS.

And selfishly, we're just interested in whether or not, actuarily, we'll out-live our retirement payments.

[NewToCA]

Originally Posted by Curmudgeon

And selfishly, we're just interested in whether or not, actuarily, we'll out-live our retirement payments.

Based on the CalPERS response, it seems like you'd better be praying for a great stock market the next 20+ years.

[actinic]

Originally Posted by mysticaltyger

Problem is, people who have their eyes open already know this & know the pensions could bust the state. People who don't will ignore or minimize this fact.

Along that line I predict an avalanche of municipal bankruptcies in the next 12 - 18 months to bust their pension obligations.

The trigger will be the point when town/city services get so bad they start compromising public safety & other services taken for granted.

Good article here: The Beholden State by Steven Malanga, City Journal Spring 2010

[wburg]

People go crazy whenever the market shifts. Recession was "the new normal" in the early 1990s, then during the dot-com boom everyone criticized CalPERS for not making big fat money in the tech market--then, the problem was that their projections weren't optimistic enough. Anyone who actually manages their retirement portfolio should know that a "low-risk" financial portfolio is also a "low-return" financial portfolio--but that time reduces risk. PERS has maintained a relatively moderate course--not zero risk, but they took a lot smaller hit in the recent crashes than many private portfolio managers. But their critics are now playing Monday morning quarterback and claiming that PERS wasn't risk-averse enough!

[NewToCA]

Originally Posted by wburg

People go crazy whenever the market shifts. Recession was "the new normal" in the early 1990s, then during the dot-com boom everyone criticized CalPERS for not making big fat money in the tech market--then, the problem was that their projections weren't optimistic enough. Anyone who actually manages their retirement portfolio should know that a "low-risk" financial portfolio is also a "low-return" financial portfolio--but that time reduces risk. PERS has maintained a relatively moderate course--not zero risk, but they took a lot smaller hit in the recent crashes than many private portfolio managers. But their critics are now playing Monday morning quarterback and claiming that PERS wasn't risk-averse enough!

Easy to understand and agree with this sentiment, when the criticism comes from politicians or pundits.

When Stanford University issues a report, they kind of put their lofty reputation on the line.