Reason Foundation

Reason Foundation

How to Fix California's Public Pension Crisis

How the state's public pension system broke and how to fix it

Adam Summers
June 3, 2010

Full Study (.pdf) Summary (.pdf)

California’s $19 billion budget deficit seems to worsen by the day, but an even larger financial crisis is brewing in the state’s pension system. Over the last two decades, state lawmakers have bestowed massive pension and benefit increases upon government workers. Unfortunately, taxpayers are now getting the bills for these handouts. Recent studies estimate California has $500 billion in unfunded pension liabilities.  My new Reason Foundation report details how the state got into this pension crisis and how to fix it. This study highlights numerous problems, including:


This study makes several recommendations to improve the state pension system and reduce the burden on taxpayers:

California’s pension and retiree health care benefits are unaffordable and unsustainable. Governor Arnold Schwarzenegger and politicians, from both sides of the political aisle, are now calling for action on this tremendous problem. They’d better hurry. Taxpayers are sick and tired of being forced to pay ever-greater amounts of their hard-earned money towards increasingly generous benefits for government employees, all while their own retirement accounts shrink amidst the recession. To avoid bankruptcy, governments at all levels are going to have to switch from defined-benefit pensions to 401(k)-style defined-contribution systems.

Adam Summers is Senior Policy Analyst

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