California’s pension systems aren’t literally insolvent, but they are carrying very large long‑term shortfalls. The exact number depends on which system you look at and which assumptions you use.
. Total statewide pension debt: Over $265 billion
A recent analysis finds that California’s state and local pension systems collectively hold over $265 billion in unfunded liabilities.
This includes:
CalPERS (public employees)
CalSTRS (teachers)
Hundreds of local pension systems
CalPERS: Still massively underfunded
CalPERS is the largest public pension fund in the U.S. It manages about $558 billion in assets.
But even after strong market years, it remains tens of billions short of what it owes future retirees.
One report notes the system is still $166 billion short on its obligations.
CalSTRS: Also deeply underwater
CalSTRS manages about $382 billion in assets, but it too carries a large unfunded liability (not quantified in the search results, but widely known to be over $100B in other public reports).
Some analysts argue the real shortfall is far worse
One source claims California faces “at least $1 trillion” in underfunded pension and retiree health liabilities when using more conservative accounting assumptions.
This is not an official state number — it comes from critics who argue the state uses overly optimistic investment return assumptions.
Why the gap exists
Search results highlight several causes:
Lower-than-expected investment returns compared to other pension systems
High risk exposure in investment portfolios
Growing retiree population
Generous benefit formulas from past decades
Insufficient contributions — including a recent two‑year “pension funding holiday” negotiated by the governor to help balance the budget
Is the system in danger of collapse?
Not imminently.
Pension systems don’t go “bankrupt” the way companies do. They can:
Raise contribution rates
Reduce future benefits (for new hires)
Adjust investment assumptions
Rely on taxpayers to fill gaps
But the long‑term pressure is real, and the shortfall is large enough that it affects state and local budgets every year.
Bottom line
California’s pension system is not broke, but it is deeply underfunded, with:
$265B+ in officially recognized pension debt
$166B shortfall in the main state fund
Some estimates claiming $1 trillion in total retirement liabilities
The gap is big enough to shape state budgets, taxes, and public services for decades.