A study released Monday by Stanford University estimates that California's three largest state-operated, public-employee pension funds—the California Public Employees' Retirement System, California State Teachers' Retirement System and University of California Retirement System—currently face a total shortfall of more than $500 billion.
The figure dwarfs the funds' own combined shortfall estimate of $55 billion as of July 2008, according to the report, which doesn't account for the more than $100 billion loss sustained by the funds during the recession. That adds a further wrinkle to California's already precarious fiscal situation.
The study, prepared by Stanford graduate students for Gov. Arnold Schwarzenegger, used a more conservative formula to estimate the pension systems' unfunded obligations, an approach advocated by a growing chorus of experts. The report also recommended increasing contributions to the funds, investing in less risky assets and trimming pension benefits for future employees.
Gov. Schwarzenegger warned Monday that pension-fund shortfalls could lead California, which faces a $20 billion budget gap in the coming fiscal year, to divert more funds from other state programs to cover pension costs.
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