Reason Foundation

Reason Foundation

Public Pension Crisis Threatens to Bankrupt California

State pension and retiree benefits have quintupled since 1998 and over 12,000 former state and local government workers collect pensions of over $100,000 a year

June 3, 2010

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 and recent studies estimate California has $500 billion in unfunded pension liabilities.  A new Reason Foundation report examines how the state got into this pension crisis and offers specifics on how to fix it. The study highlights numerous problems, including:


The Reason Foundation study, written by Adam Summers, makes several recommendations to improve California's pension system and reduce the burden on taxpayers:

"California's pension and retiree health care benefits are unaffordable and unsustainable," said Adam Summers, the study's author. "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."

Full Study Online

The full study, How California’s Public Pension System Broke (and How to Fix It), is online here:

Reason Foundation’s recent report by “Reinventing Government” author David Osborne on eliminating California's deficit with "Budgeting for Outcomes" is online here:

About Reason Foundation

Reason Foundation is a nonprofit think tank dedicated to advancing free minds and free markets. Reason Foundation produces respected public policy research on a variety of issues and publishes the critically acclaimed Reason magazine and its website, For more information, please visit


Adam Summers, Policy Analyst, Reason Foundation, (858) 204-7363
Chris Mitchell, Director of Communications, Reason Foundation, (310) 367-6109

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