04/20/2018

News

CalPERS may join union foes of 401(k) option

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. […]

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Some cities outsource their highest pension costs

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 […]

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How more generous pensions boosted city costs

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 […]

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When do CalPERS rates become ‘unsustainable’?

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 […]

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Cities look at tax hikes to pay rising pension costs

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.

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One city’s struggle with mounting CalPERS costs

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.

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Could CalSTRS reserve pay down pension debt?

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.

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Cities face seven years of growing CalPERS costs

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.

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CalPERS considers paying down new debt faster

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.

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Old cause of pension debt gets new attention

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.

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San Francisco pension debt not curbed by voters

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.”

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California’s boldest pension reform: five years in

San Diegans voted five years ago this month to switch all new city hires, except police, from pensions to 401(k)-style individual investment plans, becoming one of the first big cities to take the plunge.

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Another court setback for protectors of pensions

In another ruling allowing pension cuts, an appeals court last week overturned a state labor board ruling that a voter-approved San Diego pension reform was invalid because the city declined to bargain the issue with labor unions.

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CalSTRS lowers earnings forecast from 7.5% to 7%

The rate increase is expected to take $400 a year from the average salary of $40,000 for the new teachers. About $200 a year would have been taken if the earnings forecast had been lowered to 7.25 percent as actuaries recommended, a 0.5 percent rate increase. . . Ingram said school districts project that “before long” 25 to 33 percent of their general funds will be taken by retirement and health benefits. . . Carlos Machado of the California School Boards Association said his group expects the combined CalSTRS and CalPERS rate increases to add $1.8 billion to the annual $60 billion cost facing school districts.

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In a first, CalSTRS may set state and teacher rates

“Actuaries are recommending that one of the state’s oldest public pension systems, the California State Teachers Retirement System formed in 1913, lower its investment earnings forecast from 7.5 percent to 7.25 percent. If the newly empowered CalSTRS board adopts the lower forecast next week, state rates paid to the pension fund would increase by 0.5 percent of pay, an additional $153 million bringing the total state payment next fiscal year to $2.8 billion.”

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