Calpers May Cut Return Target Again, California's Brown SaysBy
Pension lowered rate to 7 percent from 7.5 percent in Dec.
Cities are hit harder by rising pension costs, Brown says
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.
The 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 because 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.
"We are focused on a comprehensive review of our assets and liabilities this year while concentrating on implementing the changes to the discount rate the Calpers board adopted in
December," Calpers spokeswoman Amy Morgan said by email. "No decision has been made."