CalPERS Hits 79% Funded After 11.6% Return — But $265 Billion in Pension Debt Persists Statewide

The California Public Employees' Retirement System (CalPERS) — the largest public pension fund in the United States — reported a preliminary 11.6% investment return for fiscal year 2024-25, beating its 6.8% target assumption. Total assets reached $556.2 billion. Funded status improved to 79%.

The California State Teachers' Retirement System (CalSTRS) is approximately 75% funded with $39 billion in unfunded liabilities, and reports it is on track to reach 80% ahead of its statutory schedule.

Source: CalPERS — 11.6% Preliminary Return for FY 2024-25

Source: CalPERS — Funded Status Explainer

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The $265 Billion Number

Despite strong recent returns, total statewide public pension debt across all California public plans exceeds $265 billion, according to the Reason Foundation. CalPERS alone carries an unfunded liability of approximately $166 billion. CalSTRS adds $39 billion. Hundreds of smaller municipal and county plans contribute the remainder.

Strong market returns help, but they cannot eliminate decades of accumulated underfunding. CalPERS was 68% funded in 2020. It has improved to 79% — but reaching 100% funded status at current contribution rates would take decades, assuming sustained investment returns at or above the 6.8% target.

Source: Reason Foundation — $265 Billion in Pension Debt

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The Stanford Estimate: Over $1 Trillion

Researchers at Stanford's Institute for Economic Policy Research (SIEPR) argue that official funded status numbers significantly understate the problem. Using market-basis accounting — which discounts future pension obligations at a risk-free rate rather than the assumed investment return — SIEPR estimates total unfunded liabilities for California's independent pension systems exceed $1 trillion.

The difference comes down to assumptions. CalPERS assumes it will earn 6.8% annually on its portfolio over the long term. If actual returns fall short, the unfunded liability grows. The risk-free rate (roughly 4-5% based on Treasury yields) represents a more conservative estimate of what pensions are actually worth as a guaranteed obligation.

Source: Stanford SIEPR — Funding Status of Independent Pension Systems

Source: Equable Institute — California Pension Projections

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What This Means for Cities and Counties

Pension costs are the single largest driver of fiscal stress for California's cities and counties. Employer contribution rates — the percentage of payroll that agencies must send to CalPERS — have roughly doubled over the past decade. For many small and mid-size cities, pension costs now consume 15-25% of general fund budgets, crowding out spending on roads, parks, public safety, and infrastructure maintenance.

The strong investment returns of 2024-25 provide temporary relief on contribution rates, but they do not change the structural math: California's public employers made pension promises that exceed what has been saved to pay for them, and closing that gap requires sustained contributions above current levels for decades.

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This article aggregates data from CalPERS, Stanford SIEPR, Reason Foundation, and the Equable Institute. dMedia did not conduct original reporting for this piece.