State pension system under scrutiny

August 3, 2016

The California Public Employee Retirement System is either doing just fine or in a lot of trouble, depending on whom you believe.


The reason that is important to us is that the pensions promised to past and current public employees are obligations under law that have to be kept.


Bob Feckner, writing in the opinion section of the Sacramento Bee, is one of those who believes the pension system is doing okay.


“Recent news reports and opinions would have you believe that these are dark days for a pension fund with assets of more than $301 billion,” Feckner writes. “Nothing could be further from the truth.”


He says that even though investment returns last year were shy of 1 percent, that return was a “significant achievement in a year of extraordinarily turbulent and volatile global markets. Through it all, we continued to pay promised retirement benefits.”


Returns have been higher than that,” he says — like the 18 percent achieved just two years ago.
Ed Mendel, writing for Public CEO, is somewhat less optimistic.


“Twice in recent decades CalPERS fell below 100 percent of the funding needed for promised pensions,” he says, “and twice CalPERS climbed back. But since a $100 billion investment loss in 2008, the CalPERS funding level has not recovered.”


He claims that experts expect low earnings to continue into the near future.


He quotes the CalPERS chief investment offices, Ted Eliopoulos as saying: “We have some challenges to confront in what is, both for ourselves and all institutional investors, moving into a much more challenging low-return environment.”


Gov. Jerry Brown sides with the pessimists. He has been calling for an increase in CalPERS contributions from employers, aka you and me. His reasoning has been that if investment earnings stay down, the state will have to dip into its investment reserves more than is prudent. He also reminds us that retirees are living longer, and that as a result more will be paid out in retirements.
So far, not many local governments are rushing to increase their payments.


Fortunately for us, neither Madera County nor the City of Madera are in much pension trouble.
According to District 3 Supervisor Rick Farinelli, the county’s pensions are underfunded by $134 million. That seems like a lot until you realize it is less than the total of one year’s general fund income of some $200 million.


According to City of Madera Finance director Tim Przybyla, the city’s unfunded pension liability is $29 million less than the city’s annual general fund budget of about $33 million.

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