Wednesday, March 14, 2012
The cost of pensions for state and local governments in California has just gone up. CalPERS has approved a quarter-cent reduction in its investment forecast – meaning annual pension payments from governments will go up starting in July.
The CalPERS board is scaling back its projected "rate of return" - that is, how much money the system expects it will bring in - from seven and three-quarters percent to seven and a half percent. That means an immediate $167 million dollar increase each year to the state's general fund. And cities, counties and school districts that use CalPERS will see their pension payments go up as well. CalPERS staff actually recommended twice as big a decrease, but the board said no.
The question now is whether Democrats in the California legislature will face more pressure to change the pension system. Governor Jerry Brown's twelve point proposal includes lower government payments into CalPERS, and the creation of a hybrid 401k-style system. But Democrats and their union allies believe parts of Brown's plan go too far.