It is big. The shortfall of the performance of CalPERs investments is pushed directly to localities, the cities and counties we live in and depend upon for services, to backstop. Three California cities have already gone bankrupt: Stockton, San Bernardino, and Vallejo. And in no small part due to CalPERs pension obligations. San Bernardino’s annual contribution was $5 million in 2000, but had risen to $26 million by 2012 due to increases in required funding after the housing crisis caused big losses in CalPERs investments.
Every citizen is aware that the city and county budgets took a pounding during the housing crisis, resulting in reduction of services to the taxpayers. A number of cities laid off firefighters and police. But CalPERs and the employee pensions haven't taken any cutbacks. Only modest reform of pension formulas affecting future employees has occurred.
During the boom years, the state employees got generous increases in pension formulas, but in the recession that ensued, they didn't give any of that up. The Governor and the Democrats in the Legislature in Sacramento, of course, depend upon those same unions to get re-elected.
Look at table 2 in this
The Democrats are therefore very reluctant to ask these employees to take their fair share of the pain.
"The result is that roads, parks, libraries were not being funded", according to San Bernardino mayor Carey Davis. Essentialy, CalPERs says the retirees are being robbed of the additional retirement benefits the legislature approved in 1999, and the cities are saying the taxpayers are being robbed of essential services.
The New York Times has written a good accounting of where this debacle has gotten us, and what may happen in the near future