When California voters hear calls for tax increases in the near future they should think of pensions. That truth has never been clearer now that the California Public Employees’ Retirement System board voted to establish a more realistic return rate on its investments. The end result of this action is that state and local governments will have to chip in even more money for public employee pensions.
For years, defenders of the government retirement system justified healthy retirement payouts by claiming that CalPERS investments will bring an annual return of 7.5 percent. That assertion was defended despite the fact that over the last 20 years investment returns averaged only 6.9 percent, with the current annual return bringing in only 2.3 percent.
Facing market realities, the board lowered the estimate to 7 percent, a mark that still may be unattainable.
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