March 12, 2009:
Public pension funds’ rosy forecasts pose problems
Beware of the anti-pension ideologues who come out of the woodwork during market downturns. Like vultures, they prey on the highly charged and negative investment environment, looking for ways to convince you a temporary performance downturn will be typical for all time!
They know -- but don't tell you so -- that we set our rates based on a fiscal year investment return. They don't tell you that our assumed rate of return is made based on advice from a range of experts within CalPERS and within the industry and that it is regularly evaluated every two to three years in public session. They don't tell you what you would learn from a textbook on pension management: that some years investment returns are as expected; other years, they will be more than expected and yes, some years they will be less than expected.
They don't tell you that over the last 24 years, we have exceed our assumed rate of return 17 times, and eight of those years were more than double the 7 3/4 percent assumed rate of return.With the major equity indices up 65% since that was written here's the latest from ABC News:
(And here's an interesting fact: For five years after the Great Depression, there were multiple double digit return years.)
We will withstand the market swings, with our goal in mind: to achieve our assumed rate of return averaged over many, many decades. That's what we are designed to do. That's the math that matters.
Patricia K. Macht
Assistant Executive Officer
Office of Public Affairs
The board of Calpers, the biggest U.S. public pension fund, voted on Wednesday to ask California's government for an additional $600 million in funding to bolster its finances. The vote by the board of the $202 billion California Public Employees' Retirement System comes as Governor Arnold Schwarzenegger and lawmakers face the arduous task of balancing the state government's books, which requires closing a budget gap of more than $19 billion.
The request by Calpers for more money will increase the state government's contribution to the retirement system for its next fiscal year, which begins July 1, by 18 percent to $3.9 billion....MORE
One of these days I'll get around to posting on the 1999 deal the politicians cut with the unions that doomed the taxpayers of the formerly Golden State.
In the meantime here's the database of the CalPERS $100,000 per year pension club. Over 9100 members!
And don't let the name fool you, some of the members are taking home multiples of that $100K.