How big is the problem?

Broadly, we know California state and local governments face more than $400 billion in unfunded liabilities for public employee retirement benefits—enough money to cover the state’s general fund for three years, including funding schools, universities, prisons and health care for the poor.

That debt is made up of two chunks: $254 billion in pension liabilities and $147 billion in retiree health care.

In pensions, the unfunded liability is the shortfall between retirement benefits that governments have promised and the current funding available to meet those obligations.

The $254 billion pension debt estimate comes from the state controller’s office, which collects financial data from California’s 130 state and local pension plans. Those plans cover 2.6 million workers and 2.4 million retirees for a total of more than 5 million beneficiaries as of fiscal year 2015-16. They include the state, cities, counties, school districts and public universities.

Three-quarters of the pension burden comes from the state’s two biggest systems: California Public Employees’ Retirement System(CalPERS), the nation’s largest public pension fund that manages benefits for 1.9 million state and local government employees, retirees and their families, and the California State Teachers’ Retirement System (CalSTRS), the nation’s second-largest public pension fund with 933,410 public school teachers and administrators prekindergarten through community college, and their families. CalPERS’ unfunded liability grew from $111 billion in 2015 to $138 billion in 2016. CalSTRS’ unfunded liability grew from $76.2 billion in 2015 to $96.7 billion in 2016.*

Both funds say the jump was due to changes in investment assumptions.

In addition, the total pension debt in California includes the University of California and some of the largest local governments, such as Los Angeles, that self-fund employee benefits instead of participating in CalPERS.

The other portion of retirement debt comes from retiree health care benefits that the state, public universities and many local governments have already promised to their workers. This unfunded liability is the present-day cost to provide health care and sometimes dental and vision benefits to public workers once they have retired. The benefits vary depending on what workers have negotiated, largely through collective bargaining.

No single agency keeps track of the statewide retiree health care liabilities. So CALmatters conducted a review of financial reports from the biggest public agencies in California, including the state; the University of California; the cities of Los Angeles, San Diego and San Francisco; and the counties of Los Angeles and Orange.

Here’s what we found: California’s largest government employers face a combined $147 billion in unfunded retiree health care costs. The overall cost is more when adding in all other local governments.

California is not alone.

Across the country, many states are facing large pension and retiree health care liabilities. Illinois, New Jersey and Connecticut are saddled with heavy pension costs. A survey by Pew Charitable Trusts shows California’s pension funding ranks 26th in the nation.

* This description was updated 4/5/2018