The cost of that government pension is about to go up again, for California taxpayers as well as some public employees.The average Encinitas career retiree (30+ years of service) gets $98,700 per year for life, more than the median household income, and retires many years earlier than private sector workers (source: Transparent California).
CalPERS moved to slash its official investment forecast Tuesday, a dramatic step that will translate into billions of dollars in higher annual pension contributions from the state, local governments and school districts.
CalPERS’ Finance and Administration Committee voted 6-1 to lower the forecast from 7.5 percent to 7 percent in phases over three years, starting next July.
The move is a recognition that investment returns are falling and that the California Public Employees’ Retirement System, which is just 68 percent funded, needs higher contributions from government agencies to solve its long-term problems.
“We’re in a low-growth (investment) environment, and it’s expected to remain that way the next five to 10 years,” board member Henry Jones said.
CalPERS adviser Wilshire Consulting has predicted the fund will likely earn just 6.2 percent a year over the next decade, and critics such as Dan Pellissier of California Pension Reform said Tuesday’s move doesn’t go far enough.
Board members, however, defended the action as a compromise; it will help stabilize the fund while giving municipalities and other government agencies some breathing room before they absorb the impact. Richard Costigan, chairman of the finance committee, said CalPERS officials will continue to look at the fund’s investment strategies over the next year.
“This is just a start,” Costigan said.
The state will start to absorb the impact of higher rates with the start of the new fiscal year next July. Municipalities and school districts won’t start feeling the effect until a year later. All told, the higher contribution rates will be phased in over eight years.