WAKE UP: There's A 82% Chance That California's Public Pension System Will Run Out Of Money
Gus Lubin | Dec. 17, 2011, 11:39 AM | 6,478 | 59 California's pension system is living in a fantasy world where investment returns average 12.5% annually and there's enough money for everyone.
Unfortunately that's not going to happen. A big study from Stanford Professor Joe Nation along with California Common Sense analyzed the need for major cuts to CalPERS, CalSTRS and UCRP.
The largest union, CalPERS, has a 82% chance of a budget shortfall in the next 16 years.
More highlights via Eric Savitz at Forbes:
The June funded ratio, which measures assets to liabilities. is only 74% for CalPERS even using a high-rate of return assumption for its investments. Assume a 6.2% return, and the funded ratio drops to 58%. On the same basis, the funded status is 60% for CalSTRS and 72% for UCRP.
The total unfunded liability for all three systems is close to $300 billion at a 6.2% rate of return; assume a 7.75% return and the shortfall is still $142.6 billion, “or nearly $12,000 per California household.” Using a low-risk discount rate, and the total unfunded liability balloons to $498 billion.
The reports contends it is “highly unlikely” the funds can invest their way out of the issue; to do that, CalPERS would have to average 12.5% a year for 16 years.
Every day California delays major reform — screw the legal obstacles — costs $3.4 million.
Would you sleep soundly with these odds?
Read more:
http://www.businessinsider.com/calpers-shortfall-probability-2011-12#ixzz1hHJhuhP0________________________
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Nothing to worry about here!!!
