CalWatchdog Morning Read – January 5

by CalWatchdog Staff | January 5, 2017 8:29 am

Good morning! TGIT. We begin this morning with pensions.

After two years of minuscule investment returns, the nation’s largest state pension fund – the California Public Employees’ Retirement System – has once again lowered its expected rates of return.

Even some CalPERS officials and consultants argue the lowered financial expectations don’t go far enough to shore up the fund’s financial position, as it now only has 68 percent of the assets needed to pay all its future retirement promises.

This end-of-year board vote to reduce expected investment returns from 7.5 percent to 7 percent portends difficulties for local agencies that provide pensions to their public employees through the CalPERS system.

Lowered earnings estimates mean these agencies will have to contribute significantly higher payments to the pension fund to defray the costs of these benefit packages. 

California local governments already have faced 50-percent hikes in their CalPERS payments over the past several years, which has led local officials and pension reformers to increasingly fear a continuing cycle of service cut-backs and tax increases.

Indeed, there was some pressure at CalPERS to push the expected return rates down to the 6 percent range, but some officials expressed concern about what this would mean, cost wise, for member agencies.

CalWatchdog[1] has more. 

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