The funded ratio of California pensions improved in 2025 for the third consecutive year, according to Equable Institute estimates. Currently at 84.2%, California’s funded ratio is at its highest level since 2021 (86.5%), a year in which public retirement systems experienced record-setting investment returns.
However, despite strong returns in the years since the pandemic, the funded status of California pensions remains fragile. Let’s break down the financial status of California’s largest public pension plans and examine the benefits those retirement plans offer.
Equable Insights
All figures are 2025 estimates.
- Overall Funded Ratio: 84.2%; CalPERS (78.2%) & CalSTRS (86.2%)
- Total Unfunded Liabilities: $256.4 billion
- Funded Status: Fragile
Current Financial Health of California’s Public Pensions
California state and local government agencies offer a range of different defined benefit pension plans. Some public employees are enrolled in California pensions offered through a statewide retirement system, such as CalPERS, for public employees, or CalSTRS, the California teacher pension fund. Other California public pensions are managed directly by cities and counties, such as those offered in Los Angeles, San Diego, San Francisco, and San Jose.
One metric, among others, we use to gauge the financial health of a pension plan is called funded status. Funded status measures how much money a pension fund has versus the payments it’s obligated to make. It’s often expressed as either a percentage figure, called the funded ratio, or a dollar amount, known as unfunded liabilities.
We use the funded ratio to categorize each of California’s public pensions into one of the following three groups.
- Resilient: Pension systems with stable finances that maintain a funded ratio of 90% or more for at least three years in a row
- Fragile: Pensions at risk of growing unfunded liabilities that consistently have a funded ratio between 60% and 90%
- Distressed: Pensions with funded ratios below 60% that need significant, urgent improvements
Based on this metric, California pensions — with a current funded ratio of 84.2% — are fragile.
Why California Pensions Remain Fragile in 2025
To understand where California pensions stand today, it’s helpful to know where they came from.
As noted, massive investment returns following the pandemic helped improve the funded ratio and reduce unfunded liabilities for California pensions in 2021. But when the market euphoria faded in 2022, financial markets suffered significant losses. Pensions for teachers, state workers, municipal employees, and public safety employees in California also took a financial hit.
For example, CalPERS reported a 6.1% investment loss, and CalSTRS reported its returns netted out to -1.3% for 2022. California pensions recorded a loss of 5.8% in 2022, and unfunded liabilities jumped to $323.5 billion from $180.9 billion. The state’s overall funded ratio fell to 77% from 86.5% a year earlier.
The funded status of California pensions has since improved after several years of better-than-expected returns. In 2023 and 2024, California pensions recorded positive returns of 7.3% and 9.3%, respectively. Both were above the 6.6% average assumed rate of return. Even with unfunded liabilities of $311.6 billion, the overall funded ratio increased to 80% through fiscal year 2024.
We estimate California pensions returned an average 9.8% in 2025, including 11.6% for CalPERS and 8.5% for CalSTRS, and that overall unfunded liabilities will decrease to $256.4 billion once all 2025 financial reports are finalized. This would reflect a further increase in the average funded ratio of California pensions to 84.2% in 2025 — the highest level since 2021 but still fragile.
California Public Pension Funded Status
While California’s pensions are fragile on the whole due to the outsized impact of CalPERS and CalSTRS, the state’s two largest funds, there is more variation at the plan level. In fact, many of California’s pensions are resilient.
The following table shows the funded ratio and unfunded liability amount for California’s largest retirement systems, based on what each pension plan has reported for 2024 and what we estimate for 2025.
California Public Pension Funded Ratio History
Looking back in time a bit further, historic trends for California pension funds reveal that they are recovering very slowly from funding declines that happened before and after the financial crisis of 2008-09.
The chart below shows over two decades of history of the funded ratio for California pensions combined. Explore each tab to see the funded ratio history for CalPERs, CalSTRS, and California’s other plans.
A similar pattern can be seen when looking at the unfunded liabilities of California pension plans. In total, we estimate California's unfunded liabilities will reach $256.4 billion in 2025. In 2001, California's retirement systems were overfunded by $14.3 billion.
The following chart shows historic trend lines for unfunded liabilities for CalPERS and CalSTRS specifically.
The next chart shows historic trend lines for unfunded liabilities for county and city plans in select California regions, including Los Angeles, San Diego, and San Francisco.
Scoring California Pension Plan Benefits
While all major California cities, counties, school districts, and state agencies offer their employees pension benefits, the actual benefit terms vary.
The most typical defined benefit plan, often called a “pension plan,” is based on final average salary. Another type of defined benefit plan is called a “guaranteed return” plan. However, this kind of plan is only offered by CalSTRS to part-time and seasonal employees.
Depending on the tenure of a public employee, retirement plans can work in very different ways. Equable scored each California retirement plan across multiple dimensions for public workers at different stages in their career. For complete methodology, see Equable’s interactive Retirement Security Report.
The Retirement Benefits Scores listed below represent a comprehensive measure of how well specific retirement plans offered through CalPERS and CalSTRS serve workers overall and depending on their years of service:
- Short-term workers (10 years or less)
- Medium-term workers (10-20 years)
- Full-career workers
Each pension plan is broken down into various “tiers” or classes of benefits, based on profession and hire date. The underlying benefit provisions that vary typically are related to the “benefit multiplier,” rules defining normal retirement eligibility, cost-of-living adjustment provisions, member contribution rates, and cost-sharing policies.
California Pension Investment Assumptions
California pension funds manage nearly $1.4 trillion in assets, estimated using Equable’s State of Pensions methodology as of 2025.[1] These dollars are invested in a wide range of ways. This includes stocks and bonds, but also real estate, private equity funds, natural resources, foreign currency, and hedge funds.
Based on the investment strategies that California’s pension plans decide to adopt, trustees managing the retirement systems set an “assumed rate of return” on investments.
What is Assumed Rate of Return?
The assumed rate of return is an educated guess made by actuaries about how much they think they can earn by investing pension contributions. This is the most important assumption that pension boards determine to ensure benefits are fully funded.
Historically, California pensions assumed they could get close to 8% investment returns on average, until the financial crisis of 2008-09. Since then, the average assumed rate of return for California pension plans has declined steadily and is currently estimated at 6.6% in 2025.
The chart below shows the highest and lowest investment assumptions among statewide retirement systems since 2001. The average assumed rate of return is the yellow line across the whole chart.
Notes
- This figure reflects fiscal 2025 based on preliminarily reported asset totals and market performance as of each plan’s fiscal year end date. For plans without a complete fiscal year asset total, their data for 2025 reflect Equable Institute's estimate of the funded ratio for plans. CalPERS and CalSTRS published full fiscal 2025 data as of the date of publication. The trendline shown is based on fair market value of assets for each year.
