CalPERS Future Retirement Payouts
In a previous paper (Beneath the Palo Alto Business Tax), the minimum salary andretirement payouts were demonstrated for a hypothetical Palo Alto Police Officer, hiredin 2008 at a nominal $100,000 per annum, receiving a 5.5% raise per year for thirtyyears, and a retirement benefit paid for thirty years, adjusted for a 3% CPI. That paper(www.geocities.com/wmartin46/msw_pa_business_tax_2.pdf
) showed that the officer’ssalary will double every 12 years or so, and will double again during the years of hisretirement. The paper shows that at age 81, this former city employee would be drawingover $800,000 a year in retirement payouts.The costs of paying for all of California CalPERS payouts will be estimated in this paper.Such an estimation is not an easy thing to do with any hope of accuracy, but not hard todo for an “order-of-magnitude” solution.In 2008, CalPERS is supposed to have paid $11B to government retirees. That comes toabout $22,000 per retiree (on average). Assuming that there will be additional retires inthe future, and that the retirement salaries begin to grow at the non-linear rates that weredemonstrated in the previous paper, then the total payouts for CalPERS will begin to look like those in this table:
Estimated CalPERS FutureRetirement Payouts
Number of Retirees
YearAveragePayouts 500,000 600,000
2008 $22,000 $11,000,000,000$40,000 $20,000,000,000 $24,000,000,000$60,000 $30,000,000,000 $36,000,000,0002018 $80,000 $40,000,000,000 $48,000,000,000$100,000 $50,000,000,000 $60,000,000,000$150,000 $75,000,000,000 $90,000,000,000???? $200,000 $100,000,000,000 $120,000,000,000$250,000 $125,000,000,000 $150,000,000,000$300,000 $150,000,000,000 $180,000,000,000$350,000 $175,000,000,000 $210,000,000,000$400,000 $200,000,000,000 $240,000,000,000
Total Pension Spending
CalPERS is not the only source of pension payouts in California. The Schools have asimilar agency for their retirement needs, CalSTRS; there are independent pension fundsfor Los Angeles and San Diego, as well as many smaller funds throughout the state.The following chart tracks California spending on Pensions over the past decade:http://www.usgovernmentspending.com/downchart_gs.php?chart=00-total&view=1&year=1999_2019&state=CANotice that California pension payouts have more than tripled over the last thirteen years.With the wave of over California government employees (city/county/state/specialdistrict/schools) that will be retiring during the next decade, the pension payout rate of increase will doubles increase beyond a tripping that has occurred over the last decade.
Healthcare Payouts
CalPERS will provide over $5.7 billion in health benefits "nearly 1.3 million active andretired state and local government public employees and their family members" as of 2009
[3]
. Therefore, it was the nation’s second largest public purchaser of healthbenefits
[3]
, behind the FEHBP which covered "about 8 million federal employees,retirees, and their dependents"
[109]
. Of the enrollees, 61% are state employees and 39%are local government and school employees; 74% are working and 26% are retired
[3]
.http://www.usgovernmentspending.com/downchart_gs.php?chart=10-total&view=1&year=1999_2019&state=CA As can be seen from the pensions payout chart, and the healthcare payout chart, thecombined payout for these two programs is about $100B—or about 75% of the amountspent on the State budget.
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