New Stanford University Study Predicts Public Pensions Costs in California to Consume 14-17.5% of Operating Expenses by the Year 2030

On October 2nd, Stanford University’s Institute for Economic Policy Research published a 193-page article summarizing “case studies” of 14 public entities—the State of California, three counties, six cities, three school districts, and one Special District (Bay Area Rapid Transit). The article, charting the entities’ past and predicted pension costs from fiscal years 2002-2003 to 2029-2030, is called “Pension Math: Public Pension Spending and Service Crowd Out in California, 2003-2030.” The Sacramento Bee summarized the Stanford study in an article titled “Pension Costs ‘Crowding Out’ Spending on Parks, Schools and Social Services, Report Says.”

The author of the Stanford study is Joe Nation, a former Democrat Assemblymember with a Ph.D in Public Policy Analysis. He painted a bleak picture:

  • Employer pension contributions from 2002-2003 to 2017-2018 expanded 400% on average and are projected to rise 77-117% from 2017-2018 to 2029-2030.
  • On average, public entities’ pension contributions now constitute 11.4% of their operating expenditures, compared with 3.9% in 2002-2003. Pension contributions are projected to increase to 14-17.5% of operating expenses by 2029-2030.
  • The average employer contribution rate, currently at 30.8 percent, is predicted to increase to 35.2-44.2% of payroll by 2029-30. The employer contribution rate is expressed as the proportion of all payroll used for pension payments.

The Stanford study did not look at costs of retiree health benefits, which also increased greatly since 2002-2003 and should be expected to rise in the future.

Categories: Public Pensions


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