California has the nation's largest unfunded public worker pension liability -- as much as $370 billion -- a new state-by-state comparison by a conservative state government think tank declares.
But in relative terms, the state's pension gap is by no means the nation's largest.
The new paper from Washington, D.C.-based State Budget Solutions adds more fuel to the already raging controversy over public worker pensions in California and other states. Republican legislators in California have hinted that pension reform may be the price for supporting Gov. Jerry Brown's budget plan, and just last week, the state's Little Hoover Commission called for a massive overhaul of the system for state and local government workers.
State Budget Solutions merged three academic studies of state pension funds to generate its comparison chart. They came from the Pew Center on the States, the American Enterprise Institute and the Journal of Finance.
Pew used official unfunded liability data for its report estimating that nationally, public worker pension funds are a trillion dollars short of full financing with California, at $59.5 billion, the largest in dollar terms. But with 12 percent of the nation's population and about that proportion of the nation's economy, it had just 6 percent of the nation's unfunded pension liability in the Pew analysis.
The American Enterprise Institute and the Journal of Finance study, conducted by Robert Novy-Marx of the University of Chicago and Joshua Rauh of Northwestern University, used independent methods of valuation that relied on lower estimates of future pension fund earnings. And they came up with national pension debts of $2.8 trillion and $2.5 trillion respectively.
The AEI report pegged California's unfunded liability at $398.5 billion while Novy-Marx and Rauh put it at $370.1 billion. Both results were similar to what a Stanford University team, using similar methodology, came up with last year, and both, like the Pew study, found California's pension debt to be smaller than its share of national population and economic activity.
"This report shows that states have been fooling the public and the federal government for years," said Bryan Leonard, author of the State Budget Solutions study. "The breadth and depth of the public pension crisis is finally coming to light and the numbers clearly speak for themselves."
Leonard's compilation can be found here.