CalPERS’ investment portfolio barely eked out a profit during the 2014-15 fiscal year and it performed even more poorly during the 2015-16 cycle that ended June 30, declining by $8 billion (2.6 percent) to $293.7 billion.Despite Encinitas' skyrocketing pension costs, the City Council has in recent years voted repeatedly to expand the bureaucracy, making the problem even worse. The city now spends more money on pensions for workers' early retirement than it does on its underfunded road maintenance.
Thus, CalPERS is falling extremely short of its earnings benchmark, known as the discount rate, of 7.5 percent per year, and its average earnings over the last two decades are now under that level.
It also means the fund is scarcely 70 percent of fully covering liabilities, even at 7.5 percent, and therefore under the 80 percent deemed to be minimally sufficient,
The timing for flat earnings couldn’t be worse. CalPERS is seeing pension outlays rise as baby boomer workers retire in large numbers and claim benefits that politicians irresponsibly increased during a brief period of high earnings. Moreover, the projected lifespan of retirees continues to increase, which means even more outlays.
CalPERS has been demanding hundreds of millions of dollars in additional contributions from state and local governments – hitting cities particularly hard – to offset rising outlays while hoping that the mild pension reforms instituted by Gov. Jerry Brown and the Legislature will have a moderating effect in the long run.
Wednesday, July 13, 2016