The California Public Employees Retirement System (CalPERS) is proposing an idea to reduce its estimate about how much money the fund's investments are projected to earn in future years which may drop the discount rate assumption from 7.75% to just 7.5%.
According to an Associated Press article released today, the small reduction in the discount assumption rate would ultimately require the State and other employees that are covered by the CalPERS program to increase the amount of money workers pay into the pension fund, which is estimated to be around $200 million.
And as usual any change to public pension reform will put the tax payers on the hook. In this particular situation, it looks as though tax payers will have to front more money allocated to public workers. Why you may ask? The CalPERS program admits that by reducing the assumed rate of investment, it has the effect of "increasing contributions to employers."
In other words, government agencies use tax money to pay themselves and cover their benefits. No surprise, business as usual.
Meanwhile, the State is faced with a $25 billion budget deficit. Governor Jerry Brown's current budget proposal that is waiting in the wings of the State Legislature, included specifics on CalPERS lowering the discount rate. Instead of actually doing something meaningful, like they are in Wisconsin or New Jersey, our State has to remain committed and loyal to the public workers.
Tomorrow, the Board of Directors for CalPERS will consider the change. As it stands now, the pension fund deficit is estimated to be $75 billion.
You think it is high time for California to get serious about pension fund reform?
Short answer: Yes!
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