For some time, the Los Angeles Times has been running articles aleerting readers to the troubles that California’s famous Calpers retirement system is having. In a nutshell, the assets Calpers has on hand to meet future municipal employee pension benefits fall far short of what it will likely need.
The New York Times chimed in last week with a story about the troubles that individual cities, worried about their future and seeking to extract themselves from Calpers, are experiencing.
There are two parts to the latter:
–the “official” Calpers books give a relatively rosy picture of the current situation for each municipality. They do this essentially by assuming the pension plan will eventually grow itself out of the problem. The issue here is that their actuarial assumptions have lnot been adjusted down enough to account for today’s low-inflation, near-zero interest rate world. In a sense, that pie-in-the-sky attitude would be ok with cities that want to leave Calpers …except that Calpers presents potential leavers with a far different–and much higher–bill to bring their accounts up to full funding so they can depart.
–The Stanford Institute for Economic Policy Research has developed a Pension Tracker website where Californians in many areas can quickly look up how deeply in the hole their cities are.
Irwindale, a small town in the San Gabriel Valley of Los Angeles County, has the dubious honor of being #1 on the Stanford list of most exposed to pension shortfalls. Irwindale’s Calpers account is short by $134, 907 per household of having its municipal pension funded. Irwindale has other woes–Huy Fong Srirscha, for example. But with the Stanford pension info a mouse click away, who is likely to move to Irwindale? …or to other cities high on the unfunded list?
Worse than that, I’d certainly be thinking of moving elsewhere.
California may be the most high profile instance of municipal pension underfunding, but it’s certainly not the only one.