California pension rate hikes loom after CalPERS voteCategories: California Developments
Reuters, by Tim Reid, February 18, 2014
California and many of its cities will soon be paying more for public pensions after the state’s giant retirement system voted on Tuesday to change the way it calculates contributions.
The move by the board of the California Public Employees’ Retirement System (Calpers) – the world’s biggest public pension fund with assets of $277 billion – was welcomed by the state’s Democratic governor, Jerry Brown, who had been pushing for Calpers to act more aggressively in how it funded the provision of pensions for city and state workers.
But higher pension contributions are bound to be met with angst by some California cities, which say they are already struggling to meet Calpers’s rate demands.
Pension contributions to Calpers are usually the biggest expense for California cities that pay into the system. Two cities in the state, San Bernardino and Stockton, are in bankruptcy. Pension costs were a significant factor in their budget crises.
The Calpers board on Tuesday voted to change funding assumptions to reflect longer life expectancies for workers – two years for men and 18 months for women. That will lead to higher rates as the pension system seeks to absorb the costs of retired workers living longer.