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CalPERS is sticking it to taxpayers, again


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2016 Dec 4, 10:55am   1,254 views  6 comments

by tovarichpeter   ➕follow (6)   💰tip   ignore  

http://www.eastbaytimes.com/2016/12/01/borenstein-will-calpers-finally-get-serious-about-funding-pensions/

To shore up rapidly deteriorating finances, CalPERS will consider significantly reducing its investment forecast in a long-overdue move that could shake up government retirement funds across the country.

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1   Ceffer   2016 Dec 4, 12:36pm  

Why should they charge the Public Disservice Unions more when it so cheap to lube up and thrust on the taxpayers?

2   GNL   2016 Dec 4, 12:57pm  

Why fund the damn thing at all? The private sector is supposed to 1) fund these shitty employees retirements and 2) fund their own on top of that?

Who is responsible for all of this outright fraud?

3   RC2006   2016 Dec 4, 7:19pm  

Its some real bullshit when you have over 20k+ people pulling over $100k in retirement from pension.

4   Ceffer   2016 Dec 4, 8:00pm  

Public Self Service Unions said they would strike and stop working if the pension weren't funded from new taxes, but nobody could tell the difference.

5   anonymous   2019 Feb 14, 2:07am  

CalPERS posts net return of -3.5% for 2018

California Public Employees' Retirement System, Sacramento, posted a net return of -3.5% for the year ended Dec. 31, 77 basis points below its benchmark, documents from the $351.1 billion pension system show.

For the longer term, CalPERS' portfolio earned an annualized 5.1% net return for the five years ended Dec. 31, underperforming its benchmark by 23 basis points; for the 10-year period, the pension fund returned an annualized net 7.9%, underperforming its benchmark by 74 basis points.

The best-performing asset class for the 10-year period was infrastructure with an annualized net return of 15.2%. The worst-performing asset class for the 10-year period was the forestland portfolio, which returned an annualized net -2.4%.

CalPERS' fund allocation as of Dec. 31 was 47.5% global equities, 28% income, 10.1% real estate, 8.3% private equity, 2.2% inflation-protected, 1.4% infrastructure, 1.1% for both cash and trust level assets, and the rest in forestland.

https://www.pionline.com/article/20190213/ONLINE/190219934/calpers-posts-net-return-of-35-for-2018
6   anonymous   2019 Feb 14, 2:11am  

CalPERS’ flawed forecasting increases pension debt. For sake of taxpayers and retirees, California system should stop using overly optimistic investment predictions.

Despite nearly a decade of economic growth since the end of the Great Recession, the nation’s largest public pension system remains badly underfunded with only about two-thirds of the assets it should now have.

It’s time for the California Public Employees’ Retirement System to address one of the causes of the shortfall: It should stop relying on unrealistically optimistic investment-return forecasts to help bankroll the retirement of 1.9 million state and local government workers and family members.

CalPERS is currently in the middle of a three-year lowering of its assumed investment-earnings rate, from 7.5 percent annually to 7 percent. But that’s still not low enough.

The pension system’s staff and board members should know that. Their outside consultant warned them in 2016 that the best average annual return they could expect over the next 10 years was 6.2 percent.

For the sake of taxpayers and government workers, it’s time to further reduce the critical investment-earnings assumption.

To understand the significance of the assumed rate of return, keep in mind that public pensions are funded from three sources: Contributions from government employers (taxpayers), contributions from public employees and investment returns on those contributions.

The greater the assumed rate of return on those investments, the less money employers and employees must kick in up front. So, to leave more immediate money in government coffers for salaries and public projects, politically influential labor unions and many lawmakers push for optimistic assumptions about investment returns.

But reality catches up when those investment-return projections fail to pan out. The resulting shortfall is a debt that must be paid off to ensure workers’ pensions are safe.

CalPERS’ debt now stands at an all-time high $146 billion, an average of more than $11,000 per California household. Payments on the shortfall are helping drive today’s rapidly rising pension costs that siphon off a growing portion of government revenues.

It’s time to break the cycle, to use realistic investment assumptions to properly fund the system up front, rather than financing it through costly debt payments.

Using overly aggressive forecasting is unfair and financially unwise for many reasons:

Unfair to taxpayers: It transfers pension costs from government employees to taxpayers. Upfront pension costs are shared by workers and employers. But when investment earnings fall short, government employers (taxpayers), make up the difference.

Unfair to future generations: Pensions should be properly funded up front, when government workers perform labor and earn benefits. When investment earnings fall short, the debt is amortized over 20 to 30 years, forcing our children and grandchildren to pay costs for labor that benefits the current generation. That means future generations will have to pay more taxes or absorb more service cuts.

Hides full cost of pensions: Overdependence on investment earnings hides part of the cost of pensions, making them look cheaper than they are. The result: Current politicians agree to benefits their agencies can’t afford but leave future leaders to find a way to help pay for it.

Increases long-term cost: It takes money to make money. Underfunding the system upfront reduces the potential for future investment returns and increases the total cost to taxpayers.

Leaves CalPERS more vulnerable: Underfunding a pension system leaves it more vulnerable to economic downturn, and puts workers’ pensions at greater risk. The only thing that saved CalPERS during the Great Recession was that it was fully funded, with 101 percent of the assets it should have had, as the downturn began. Two years later that funded ratio had dropped precipitously to 61 percent.

CalPERS has struggled to recover ever since. On June 30, 2018, CalPERS had just 71 percent of the assets it should have had on hand. By Dec. 31, that funded ratio had dropped to about 66 percent, although it has recovered some since. CalPERS would slip into insolvency if it had to absorb another 40-point decline.

To be sure, overly optimistic investment forecasting is not the only cause of the system’s severe shortfall. It’s actuarial assumptions about life-expectancy were off and had been leading to undercollection of contributions; that’s been fixed. And it had been slow to cover past shortfalls; that’s been only partially fixed.

As for the 7 percent investment assumption, many like to cherry-pick the pension system’s past years of strong performance returns to justify the forecast.

But, Yu Ben Meng, CalPERS newly appointed chief investment officer, told his board last month that over the past 10 years and past 20 years, the system had fallen short of the 7 percent mark. Moreover, he said, market conditions make hitting that target in the future even more challenging.

Reaching that target requires making riskier investments, with greater upside potential and, of course, greater downside peril. It’s risk that an already underfunded pension system cannot afford to take.

For the sake of taxpayers and government workers, CalPERS should not be relying so heavily on overly optimistic investment forecasts. They should stop digging the hole deeper.

https://www.mercurynews.com/2019/02/13/borenstein-calpers-piling-more-pension-debt-on-california-taxpayers/

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