California Pension Funds Lower Earnings Forecast
The Sacramento Bee reports the California Public Employee Retirement System has lowered its earnings expectations from 7.5% to 7%. That may not seem like much except when we're talking about billions of dollars, never mind the funds being underfunded already.
what this means is cities, counties and the state might have to get more more money from taxpayers to cover the shortfall. That tax money, instead of being used for current government services, will be used to pay pensions. All of this, though, assumes their estimates of lower earnings are accurate.
The pain won't be felt by communities right away as payments will be phased in starting next year:
" 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."
The public employee unions will continue to tell us nothing is wrong with the situation. I actually sympathize but am like most people who would rather my tax money pay for current programs than for employees that aren't working anymore. This situation has been festering for some time. It doesn't seem anyone in government at either the city or state level has the courage to deal with it effectively.
posted by Fred Mangels @ 7:48 AM
9 comments
9 Comments:
Its been coming to roost for years. Police, fireman, some retire as early as 52. Retirement plans pay out 60 to 90 % with benefits. Retire at 55 at 80 % that's a sweet deal.
Retired employees worked for less salary in exchange for a retirement system.
To cut their retirement is to fail to fully pay them for their labor.
It is stealing.
It's a Donald J.Trump move.
"I know I said I'd pay you that much to work for me. But I'm not going to. Sue me, I can bury you in legal costs."
Like Bill Wittle says, they don't collect taxes for social issues, they create social issues so they can collect taxes.
What is Fred's recommendation? Cut benefits already promised or continue to raise taxes?
I have no idea. Best I can figure is along the line of what others have suggested and turn the pensions into more of a 401k plan and get rid of defined benefits meaning they're guaranteed a certain retirement income. I'd go more with defined contributions, where taxpayers are only liable for regular contributions but not benefits.
In other words, it would seem the same except retirees aren't guaranteed an income of a certain amount each month. They would be guaranteed a taxpayer supplied contribution to their retirement account each month. Thus, their retirement income would depend on how well their investment fund but taxpayers wouldn't be on the hook if the retirement fund underperforms.
That's the best I can come up with.
CALPERS is not going to make the 7% either. They should drop the estimated rate of return to a realistic 5% or less.
One of the many problems with the system is that CALPERS can't invest companies that make a good return because of their misguided social justice restrictions. CALPERS would rather go broke rather than invest in companies that don't share in their misguided social justice goals.
I have no pity.
NY Times take on the situation
http://www.nytimes.com/2016/12/21/business/dealbook/california-calpers-pension-fund-investment.html?smid=tw-nytimesbusiness&smtyp=cur&_r=0
Calpers is giving a 60% cutback to the rural workers. This isn't surprising, considering their agenda 2030 plan.
Haha, did you see the news that CalExit now has an embassy in Moscow, so they can transition easier to becoming completely ruled by the UN saudi's & commies?
An embassy in Moscow.
That might make sense. It could make it easier to arrange for the emigration of Californian Republicans to a country where they would be more comfortable.
Russia has a shrinking population problem. Russia might welcome some people who admire their Tzar and form of government.
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