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Brown urges pension fund to address rising costs

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From page A5 | February 06, 2014 | 2 Comments

SACRAMENTO — Gov. Jerry Brown on Wednesday urged California’s largest public pension fund to act quickly to address rising costs caused by retirees’ longer life expectancies, saying failure to do so would widen the fund’s liabilities by billions of dollars.

In a letter sent to the board of the California Public Employees’ Retirement System, he urged members to acknowledge the demographic changes immediately and phase in the costs over three years rather than waiting two years, as CalPERS’ staff recommends.

“No one likes to pay more for pensions, but ignoring their true costs for two more years will only burden the system and cost more in the long run,” Brown wrote.

The pension fund is $45 billion in the red and will grow by $9 billion because of retirees living longer, the letter said. New projections show the life expectancy of retirees growing as much as two years.

CalPERS staff will make formal recommendations to the board next week and has been reviewing its assumptions about contribution rates and retiree life expectancy, the fund said in a statement issued in response to the governor’s letter.

In December, CalPERS staff recommended using new assumptions in setting contribution rates for the 2016-17 fiscal year.

The governor’s letter said waiting two more years will lead to an additional $3.7 billion in costs over the next two decades. H.D. Palmer, spokesman for the state Finance Department, clarified that the figure refers to costs associated with delaying changes to projected investment returns, life expectancy and contribution rates.

Palmer said the state is looking to start paying higher rates as early as this summer. Earlier payments mean more interest to pay for growing pension costs.

The board must consider the economy, financial markets and the ability of government workers and agencies to pay more for pensions, CalPERS wrote in its statement. The fund, with more than 1.6 million members, provides retiree benefits for both state and local government workers.

Brown has faced criticism from Republican lawmakers for not addressing another pension problem in his proposed 2014-15 budget: an $80 billion teachers’ pension shortfall. The Legislature sets contributions for teachers’ pensions but has no direct say in setting contribution rates for CalPERS.

CalPERS has increased contribution levels twice in the last two years.

The Associated Press

The Associated Press

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Discussion | 2 comments

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  • Tax PayerFebruary 06, 2014 - 5:20 am

    Ok, so workers that actually work for their retirements are being told we cannot afford you due to you living too long. But we have Obamacare (California Covered) where these same folks support with their tax payments for folks that don't work? Society as we know it is so screwed up!

    Reply | Report abusive comment
  • The MisterFebruary 06, 2014 - 7:00 am

    Is the State government trying to exert more control over Cal-PERS? It's a very slippery slope to politicize Cal-PERS any more than it already is. But I'm sure all those low-capacity lawmakers in Sacramento just salivate at the thought of getting their hands on all that Cal-PERS money. I'm sure that the people running Cal-PERS are smart enough to be on the look out for future trends that might impact their long-term ability to payout pensions... I seriously doubt that Brown is adding anything new to the conversations... other than his ham-handed threat of government interference. Remember, if it's Brown, flush it down (while you still have some water!).

    Reply | Report abusive comment
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