Wednesday, April 15, 2015

Pension costs going up yet again

Sacramento Bee:
CalPERS is about to raise pension contribution rates again, this time by more than 9 percent, a move that will cost state government and local school districts nearly $600 million.

The increases are the latest step by CalPERS to gradually shore up its finances. In early 2014, CalPERS said it would embark on a series of significant rate hikes, and on Tuesday the pension fund’s finance and administration committee recommended higher rates for the upcoming fiscal year.

While CalPERS is continuing to deal with the lingering effects of the 2008 crash in the financial markets, it pinned the latest rate hike primarily on growth in government payrolls and recent demographic assumptions that show retirees living longer.
Today's hike is just for state workers and school districts. They're coming for Encinitas and other cities this fall:
The CalPERS board will vote in the fall on higher rates for participating cities, counties and other local government agencies. Those rates will take effect with the fiscal year starting July 2016.
Nothing to see here, folks... move along...


  1. Let's hope interest rates will start to rise soon. Low interest rates are a real drag on the economy right now. It kills risk free return rates, and is a disincentive to savings. Numbers out yesterday show that the increase in jobs and wage growth have resulted not in spending, but debt paydown. In other words, it's better to pay down 12% debt than save at 2%. No arbitrage there!

    - The Sculpin

    1. Well you could always borrow home equity at 3.75% and speculate in real estate or the stock market!

    2. EU, if you had the cash to pay off a 30-year 3.75% mortgage early, would you do it? With the mortgage interest deduction and long term inflation, what is the effective real rate on that mortgage (the rate if return you would have to achieve to come out ahead investing the cash elsewhere)? 1%?

    3. Totally depends on the person's risk aversion, job stability, etc.

      But I like your thinking. I would probably keep the mortgage and invest the money.

    4. Pay off the mortgage, then low-risk-invest whatever monthly amount you would have been paying the mortgage holder had you not paid it off.

  2. Spending is definitely not going up, and neither is job growth, at least not higher paid jobs. We've been treading water ever since the recession.


  3. City needs to cut staff like the useless left over communications officer that blew communications for the housing element and doesn't provide any value for the $135k budget. Cut Parks and Rec Staff and lifeguards. All fluff. Save the funds for much needed projects.

  4. Muir needs a cost of living update - he feels pinched at $179,000/year!