To show the importance of acting quickly, the report to the Legislature will have a calculation of where CalSTRS funding would be if the rate increases enacted in 2014 had been promptly adopted after the 2008-09 financial crisis. “If we had been able to raise the rates, we would now be about 70 percent funded […]
Chief Executive Officer Marcie Frost told the board investment returns were negative 3.9 percent last year but over the last 10 years averaged 7.9 percent, still above the current earnings target of 7 percent. The new chief investment officer, Ben Meng, who began work this month, told the board the projected funding level was “around […]
Gov. Newsom proposed a state budget yesterday that would give CalPERS an extra $3 billion to pay down debt and CalSTRS a potential extra $5.9 billion, most to pay down debt but also some for relief to schools hard hit by doubling pension costs. “We are investing an historic amount and doing what no previous […]
A new report shows a third of local governments in CalPERS will have police and firefighter employer rates next fiscal year that are at least 50 percent of pay, a level that a former CalPERS chief actuary believed a decade ago would be “unsustainable.” At the high end, the number of local governments with rates […]
A bill by state Sen. Steven Glazer, D-Orinda, giving new state workers the option new University of California workers received two years ago, a 401(k)-style plan rather than a pension, is opposed by unions and soon may be opposed by CalPERS. More than a third of eligible new UC employees have chosen a 401(k)-style plan. […]
Dozens of cities, many of them formed in recent decades, do not directly pay police and firefighter pension rates. They get their safety services though contracts with county sheriff departments and large fire districts. An example is Lake Forest, a community in Orange County formerly known as El Toro, which incorporated in 1991 and had […]
CalPERS sponsored legislation resulting in more generous city police and firefighter pensions, SB 400 in 1999, a well-known issue in the debate about whether growing pension costs are “unsustainable.” But CalPERS also backed legislation, AB 616 in 2001, giving most local government employees the option of bargaining for generous pensions once limited to police and […]
At the League news conference a reporter’s request for a definition of “unsustainability” was answered by Daniel Keen, a former Vallejo city manager with two decades of experience in five cities. The ability to absorb rising pension costs varies from city to city, Keen said, but one thing unsustainable for all is the erosion of […]
El Segundo and Arcadia were among two dozen cities urging the CalPERS board last month to avoid another employer rate increase, the fifth in the last five years, when adjusting its $344 billion investment portfolio this month. Last week, the two well-funded cities, both with currently balanced budgets and high service levels, considered sales tax increases. Despite cutting costs, the cities now face deficits from a steep rise in CalPERS rates scheduled for the next seven years.
After six months of study and negotiation, the city of more than 36,000 located in the foothills of the San Gabriel Mountains east of Pasadena developed an unusual five-point “CalPERS Response Plan“ that does not cut staff or services.
As CalSTRS rates are more than doubling, squeezing school budgets, an inflation-protection account that keeps teacher pensions from dropping below 85 percent of their original purchasing power has a large and growing excess of funding, $5.6 billion last year.
Cities jolted by a new CalPERS rate increase laid out in their annual pension reports this fall are finding few options for cost relief. Basically, they can pay more now to avoid higher costs later or curb the growth of employees and their pay.
As rising pension costs squeeze funding from government services, a big change could come from a state Supreme Court decision. Two unanimous rulings by appellate court panels allow cuts in pensions earned by current employees in the future.
Appeals of the two rulings have yet to be heard by the Supreme Court. How the high court will rule, and what might follow if the groundbreaking appellate rulings are upheld, is far from clear.
CalPERS plans to get local government reaction to a proposed new policy that would pay down new pension debt over a shorter period, yielding big savings in the long run but also requiring larger payments in the early years.
Employer rates for current debt or “unfunded liability” would not be changed, Scott Terando, CalPERS chief actuary, told the board last week.
But for new debt from investment losses, the payment period would be shortened from the current 30 years to perhaps 20 years, Terando said, and the higher debt payments from years with investment losses could be offset by lower payments from years with gains.
CalPERS may soon report investment earnings for the fiscal year ending June 30 that are near or even above its long-term target of 7 percent, up from a return of 0.61 percent the previous year. But the nation’s largest public pension system will still be seriously underfunded. . . . Despite a lengthy bull market that followed a stock market crash in 2008, CalPERS recently was only 65 percent funded. Now CalPERS is worried about a downturn that might drop funding below 50 percent, a red line actuaries think makes recovery very difficult.
Last month, a Civil Grand Jury report concluded that most of the debt of the San Francisco Employees Retirement System, which has been underfunded for more than a decade, was approved by the voters who in theory are a safeguard. . . . The grand jury suggests voters may have been misled by official ballot pamphlet cost information on two of the three “significant” pension increases described in the report. A dozen retroactive retirement benefit increases between 1996 and 2008 are listed in a report appendix. Voters were told that even with a retroactive pension increase for most employees (Proposition C in 2000) the city is not expected to make an annual payment to the retirement system “for at least the next 15 years.”