Will CalPERS Face Reality and Cut ROI Target to Actual Number

CalPERS will on July 1, 2017 raise the mandatory contribution on member agencies by an average of 13%. That is based on a 7% return on investment (ROI). This is down from the historical 7.5% ROI goal. That was a phony—as shown by the $1.4 trillion unfunded liability. In 2015-16, the ROI was .61%–900% LESS that the 7% goal. In 2016-17, the unfunded liability is going up 20%, or $280 BILLION.

“The problem is acute in California, where it helped bankrupt the cities of Stockton, San Bernardino and Vallejo.

In California, local governments are under more pressure than the state, since a greater share of their budgets are consumed by payroll, Brown said. The contributions to Calpers by the state government alone have nearly doubled in five years.

“The pensions are squeezing local government, more than state government,” he said.

Any real ROI numbers will force dozens of California cities into immediate bankruptcy—and the rest into massive cuts. It appears that only one major California city will not be affected—Fresno—they have put in enough money in the past to weather this storm.

Calpers May Cut Return Target Again, California’s Brown Says

, Romy Varghese, 3/2/17 –

California Governor Jerry Brown said the state’s retirement system is “probably” going to lower its investment-return goal again, a move that will further pressure local governments already straining under rising pension costs.

California Public Employees’ Retirement System decided in December to lower its assumed rate of return to 7 percent from 7.50 percent over three years, which means higher contributions to make up the difference.

“All that imposes greater costs on local and state government,” Brown said during an interview in his Sacramento office. “The pressure will mount.”

Across the country, state and local governments have about $2 trillion less than what they need to cover retirement benefits — the result of investment losses, inadequate contributions and perks granted in boom times. The problem is acute in California, where it helped bankrupt the cities of Stockton, San Bernardino and Vallejo.

In California, local governments are under more pressure than the state, since a greater share of their budgets are consumed by payroll, Brown said. The contributions to Calpers by the state government alone have nearly doubled in five years.

“The pensions are squeezing local government, more than state government,” he said.

A phone message and email to the press office of Calpers weren’t immediately returned.