Plan at a Glance
California Public Employees Retirement Fund
Funded Ratio (FY2024)
73.8%
Unfunded Liability (FY2024)
$179.1B
Assets (FY2024)
$505.4B
Liabilities (FY2024)
$684.5B
CalPERS Monitor
Legislation could repeat California's past pension mistakes and undermine years of progress.
The nation's largest public pension, the California Public Employees' Retirement System (CalPERS), continues to be a major driver of the state's growth in spending. In 2025, government employers (local governments, school districts, and the state of California) paid $23.4 billion to CalPERS, most of which went to pay for the state's growing unfunded liabilities. While past public pension reforms have helped slow the growth of the state’s pension-related costs, lawmakers need to continue to pursue policies that fund the benefits already promised to retirees and deliver adequate retirement benefits to current public workers without incurring inordinate costs on an already strained tax base.
CalPERS had over $179 billion in unfunded liabilities at the end of its 2023-24 fiscal year, up from $114 billion in 2015.
In this interactive tool, we examine the history of reform for CalPERS and evaluate its ongoing path toward fully funding promised pension benefits. Actuarial modeling by the Pension Integrity Project at the Reason Foundation shows the potential costs of veering away from past public pensionreforms, as state lawmakers are currently considering.
Historical Reform Overview (1977-Present)
Key legislative and fiscal milestones that shaped California's public pension landscape.
1977 Collective Bargaining
California lawmakers extended collective bargaining rights to state employees, allowing CalPERS and CalSTRS to negotiate directly with public employee unions in benefit decisions without the approval of the legislature and taxpayers.
1999 Benefit Expansion
In 1999, Senate Bill 400 (passed by the legislature and signed by then-Gov. Gray Davis) significantly enhanced state worker benefits, adding an estimated $600 million in annual costs. The legislature granted these significant benefit increases without actually providing the necessary funding. Instead, lawmakers assumed they could cover the additional costs of the benefit increases with investment gains, a decision that led to massive growth in the state’s public pension debt due to CalPERS’ market losses in the 2000s.
2009 Funding Crisis
California's public pension debt (funding shortfalls to pay for already promised pension benefits) skyrocketed to more than $200 billion, with $115 billion associated with CalPERS. Lawmakers’ hopes of stock market gains covering benefit promises they made in 1999 turn into the realization that these and other benefits cause massive debt and will require a significant infusion of funding that will inevitably have to come from taxpayers.
2012 Legislative Reform
Following years of negotiations, the legislature and then-Gov. Jerry Brown passed the Public Employees' Pension Reform Act (PEPRA), which set guardrails on collective bargaining, placed crucial limits on retirement benefit formulas, increased retirement ages, capped the annual salary used for calculating pension benefits, and established equal sharing of employee contribution rates.
2025 Partial Progress
California pensions have made meager progress in addressing the state's massive pension debt. The CalPERS funded ratio has improved from around 60% in 2009 to 73.8%, but its total unfunded liability remains above $179 billion. CalPERS actuaries estimate that PEPRA has saved the state more than $5 billion and will save more than $25 billion over the next decade. The state is still decades away from eliminating pension debt and fully funding the retirement benefits promised to public workers.
2026 Policy Risk
California lawmakers are currently considering Assembly Bill 1383, which would undermine crucial PEPRA reforms. The bill would grant an unfunded pension benefit increase by expanding the definition of pensionable compensation. It would also remove the cost-sharing limits in PEPRA that protect taxpayers from runaway costs. AB 1383 would give public safety workers special exceptions, reducing their retirement age and granting them a higher level of pension benefits. Like the disastrous 1999 benefit increase, this law would add large costs for taxpayers that could easily balloon if the state’s investments experience another market downturn.
The Potential Costs of AB 1383
Best-case scenario costs
According to actuarial modeling by the Pension Integrity Project at the Reason Foundation, sweetening pension benefits for public safety workers would increase 30-year costs from $485 billion to $497.2 billion for CalPERS. That would be $12.1 billion in additional costs borne by taxpayers. This assumes the plan will achieve the expected 6.8% return with no more major recessions.
Source: Pension Integrity Project analysis of CalPERS valuation reports.
Funded Ratio Timeline (FY2001-FY2024)
Before burdening Californians with an unknown but steep increase in costs, policymakers should keep the lessons from 1999’s extremely costly pension bill in mind. Making extra benefit promises today could cost future taxpayers much more than currently anticipated. Instead of repeating past mistakes that have riddled taxpayers with public pension debt, the focus needs to be on staying the course with reforms like PEPRA that are slowly working and continuing to push toward the full funding of benefits promised to government workers.
California’s pension is still decades away from achieving this goal of fully funding CalPERS and the system is poorly positioned to withstand another recession. CalPERS’ funded ratio has improved, but funding shortfalls (in dollar terms) have grown to today’s $179 billion. Like any other type of debt, this shortfall incurs a heavy interest cost.
Funded Ratio
Unfunded Accrued Liability (UAL)
Source: Pension Integrity Project analysis of CalPERS valuation reports.
CalPERS Assumed Return vs 10-Year Treasury (1934-2025)
CalPERS also remains very dependent on lofty investment expectations. The 10-year Treasury can be used as a metric to mark what is considered a very low-risk investment. Long ago, counting on an 8% return was a relatively sure thing for pension plans, but that certainty has degraded significantly since the 1990s. In response, CalPERS has had to gradually reduce its investment return expectations while simultaneously expanding into higher-risk, higher-reward investments in an effort to reduce its pension debt. The result of taking on this risk is that the system is much more vulnerable to recessions. While CalPERS funding has improved, the risk of major losses remains very real.
The chart below compares the CalPERS assumed rate of return with the annual 10-year Treasury yield over time.
Assumed Return
10-Year Treasury
Source: Pension Integrity Project analysis of CalPERS valuation reports; 10-year Treasury series from Aswath Damodaran (NYU Stern), Historical Returns on Stocks, Bonds and Bills: 1928-Current.
Unfunded Liability Under Stress Scenarios
Despite over a decade of PEPRA successfully reducing costs, CalPERS remains highly vulnerable to market stress. According to Reason Foundation's actuarial modeling of the plan, another major recession similar to the one in 2008 would nearly double the system's unfunded liabilities overnight, to over $318 billion.
California has spent nearly two decades improving CalPERS funding to 75% (up from 60% in 2009). Another recession could bring that funding back down to 55%, leaving the state at real risk of falling short in paying for the benefits promised to public workers. California policymakers hope that the pension debt owed to CalPERS members will be paid off by 2045, but any outcome that deviates from the plan's current assumed 6.8% return will push that target out and shift more costs onto future taxpayers.
Unfunded Liability (Real) - Recurring Recession
Source: Pension Integrity Project analysis of CalPERS valuation reports.
Bottom Line
California has made some valuable progress in recovering from the legislative mistakes and major market losses in the 1990s and 2000s, but there is still a lot of debt to be paid and work to be done before lawmakers can say they have saved up enough to fulfill pension promises to public workers.
Undermining important guardrails set in place by the PEPRA reform, as Assembly Bill 1383 would, would be making the same disastrous mistake lawmakers made in 1999. Local governments and state taxpayers are still paying dearly for that costly mistake today. Instead of adding an additional $14 billion in potential public pension costs to be borne by taxpayers, policymakers should stay the course set by PEPRA and work to further reduce the state’s exposure to pension debt.