CalPERS votes on more-stable, less-lucrative investments over Gov. Jerry Brown’s objectionsCategories: California Developments,Pension Rate Stabilization
The Orange County Register by The Associated Press, November 19, 2015
The board that oversees the nation’s largest public pension fund voted Wednesday to reduce its investments in risky funds as a cushion against economic downturns, prompting a rebuke from Gov. Jerry Brown, who called the move “irresponsible.”
The move by the California Public Employees’ Retirement System will gradually lower the expected rate of return to 6.5 percent, over a 21-year period, from the current 7.5 percent.
CalPERS is the latest public pension fund to lower its target. The body said the change would help it pay down unfunded liability and provide greater predictability in employer contribution rates.
“Ensuring the long-term sustainability of the fund is a priority for everyone on this board, and this policy helps do that,” Rob Feckner, president of the CalPERS board, said in a statement.
The Democratic governor, however, said that approach will expose the fund to unacceptable risks. He had advocated a plan that would have slashed the rate in just five years, the Sacramento Bee reported.
“I am deeply disappointed that the CalPERS Board reversed course and adopted an irresponsible plan that will only keep the system dependent on unrealistic investment returns,” Brown said in a statement.
State and local governments as well as workers could be on the hook to make up the difference in returns if the CalPERS fund does not earn enough. The changes approved Wednesday were supported by public employee labor unions that do not want to stress employers, the Bee reported.
The nearly $300 billion system far exceeded projections in 2014, posting an overall 18.4 percent return on investments last year. The bullish stock market helped boost its funding level to 77 percent at the end of last fiscal year.
CalPERS officials said the new approach will stabilize the fund and eventually make CalPERS “fully funded,” the Bee reported.