SACRAMENTO: CalPERS, final approval, reduction in investment forecast, down from 7.75 percent to 7.5 percent, anticipated $167 million additional cost to the state + higher costs for municipalities and school districts that belong to CalPERS system....
* Sacramento Bee: "CalPERS OKs reduction in investment forecast, costing state extra $167 million per year" - From the Bee:
CalPERS gave final approval today to a quarter-point reduction in its investment forecast, but will look at softening the fiscal impact on government budgets.
The lowered forecast will cost the state an extra $167 million a year, and will also raise costs for the school districts and municipalities that belong to the California Public Employees' Retirement System. But the CalPERS board, sensitive to piling a higher burden on cash-strapped government agencies, told its staff to examine phasing in the dollar impact over two years.
CalPERS' governing board voted 9-1 to lower the investment forecast to 7.5 percent, affirming a recommendation Tuesday by its pension and health benefits committee. The panel sidestepped a proposal by CalPERS' actuarial staff that the forecast be slashed a half point, to 7.25 percent - a move that would have cost the state's general fund $425 million a year in additional costs. As it is, cutting the forecast by a quarter point will put increased financial pressure on the state, beginning with the new fiscal year July 1. . . . . . .
Instead of forcing agencies to swallow the change all at once, board member George Diehr proposed phasing it in over two years. Labor leaders and local government officials pleaded for the phase-in.
CalPERS was facing pressure to reduce the investment forecast, as many other public pension funds have done, in the face of a volatile investment and economic climate. CalPERS has averaged 8.4 percent gains over the past two decades but earned just 1.1 percent in calendar 2011.
The impact of the forecast adjustment goes beyond the state budget. School districts, which use CalPERS to cover employees other teachers, will have to pump an extra $137 million a year into the pension fund. CalPERS didn't have an estimate of the impact on cities, counties and other municipalities. Their contributions won't rise until July 2013.