CalPERS Still $153 Billion Underwater Despite Near Record Returns

Thirty years of running hedge funds, private equity deals, and now outsourced CIO roles for ultra-high-net-worth family offices taught me one ironclad rule. Optimistic assumptions in a spreadsheet are just fraud wearing a tie. I watched markets crash in 2008 and rebound in ways no model predicted. That is why the latest CalPERS numbers should alarm every California taxpayer, business owner, and parent who still believes in fiscal reality over political theater.

Even after the stock-market tailwinds that delivered an 11.6 percent preliminary return for the fiscal year ended June 30, 2025, CalPERS sits at roughly 79 percent funded. The system holds approximately $563 billion in assets against $716 billion in liabilities. That leaves a cool $153 billion hole. The state budget, meanwhile, quietly props up $11.8 billion in extra pension payments over the next four years. Newsom calls the rainy-day fund prudent stewardship. I call it pension welfare for union grifters dressed up as fiscal responsibility.

Let me be clear. I did not pull these figures from a partisan blog. They come straight from CalPERS own July 2025 announcement and Governor Newsom’s January 2026 budget proposal. The fund brags about climbing from 71 percent funded in 2023 to 79 percent now. Impressive until you remember the assumed rate of return is 6.8 percent. My old private-equity teams never banked the family fortune on perpetual 6.8 percent gains. We stress-tested for recessions, volatility, and the occasional bear market that refuses to cooperate. CalPERS bets the ranch on them every year. When reality bites, taxpayers and school districts foot the bill.

Combine CalPERS with CalSTRS and the total unfunded liability for Californias two largest public pension systems exceeds $240 billion. Local governments and school districts now divert up to 16 percent of their budgets just to keep the pension machine fed. That is money yanked from classrooms, road repairs, and public safety. I coached youth sports in South Orange County for years. Those same districts that once built strong kids now scramble to balance books while promising retirees’ inflation-proof, market-proof checks that the rest of us in the private sector can only dream about. My lived experience has taught me early that handouts never built character. They built dependency. Public pensions have become the ultimate handout, guaranteed by law and backed by the next generations’ tax dollars.

Look at the history. In 2013 Governor Jerry Brown pushed through PEPRA, the Public Employees’ Pension Reform Act. It was a modest start, raising retirement ages and curbing some spikes for new hires. Unions screamed bloody murder. They are still trying to unwind it today like a bad Sopranos deal gone sideways. Every time markets deliver a strong year, as they did in 2024-25, the political class declares victory and resumes business as usual. No serious reform. No shift to reality-based accounting. Just more promises built on the same shaky 6.8 percent assumption. Pink Floyd had it right. The money flows while taxpayers foot the soft fraud.

This is not abstract policy wonkery. It is personal. My oldest son graduated from West Point and serves this country while California kids rack up participation trophies and hormone blockers. I pay the highest state income taxes in the nation to subsidize a system that rewards longevity over performance. As 30 year financial services veteran, I learned that real security demands discipline, not wishful thinking. The same principle applies to state finances.

The solution is straightforward and long overdue. First, shift all new public hires to a defined-contribution 401(k)-style plan. Employees get skin in the game. Markets deliver what markets deliver. No more guaranteed taxpayer backstop. Second, cap cost-of-living adjustments at a realistic inflation measure, not the current open-ended escalator. Third, mandate full transparency audits conducted by independent private-sector firms, not the same insiders who keep moving the goalposts. These changes respect the promises already made to current retirees while protecting the next generation from intergenerational theft.

California does not lack revenue. It lacks discipline. The state just enjoyed a $42 billion revenue tailwind from capital gains and tech. Yet structural deficits loom because legacy pension costs and sanctuary mandates keep growing faster than the economy. As a constitutional originalist, I believe government should do few things well, starting with honoring contracts without bankrupting the citizenry.

California taxpayers are facing a roughly $6,000 per-resident pension liability that keeps rising. We are burdening the future generation with a debt load which is unsustainable and that affects every family trying to build a life in this beautiful state.