Thumbs down: CalPERS: A step forward and one back

Ten days ago, we complimented the California Public Employees Retirement System board for adopting a more realistic forecast for returns on its $303 billion investment fund (“CalPERS gets real, but cities pay the price,” Dec. 23). We weren’t alone. CalPERS has fallen short of its 7.5 percent goal over the past 20 years, resulting in liabilities that will fall largely on the state’s taxpayers. And its own consultants say it isn’t likely to meet its goal over the next 20 years either. Gradually reducing the investment goal to 7 percent by 2019 will mean that the state and other member agencies, including local cities and school districts, must pay more money into the retirement fund. But that should begin to bend the curve on the unfunded liabilities that are threatening to choke off funding for public services.

So why are giving CalPERS a thumbs down now? We overlooked something in the fine print. CalPERS is reducing its investment goal over three years, but the board is putting off the full impact on member agencies until 2024. That fact was pointed out by the East Bay Times. Postponing the financial reckoning reduces the incentive for public employers to press at the bargaining table for increased employee contributions to help CalPERS dig out from under a shortfall that is now estimated at $170 billion. It’s going to take more than half-steps and half-measures to fill that chasm.