California pension fund considers rate increase
June 16, 2010
SACRAMENTO, Calif. (AP) – Board members of California’s largest public pension fund said Tuesday they are likely to take more money from the state general fund to pay employee pension benefits, a proposal that has led to criticism at a time when the state faces a $19 billion deficit.
Board members for the California Public Employees Retirement System said the amount would be less than the $600 million increase they had estimated last month.
That’s in part because the Legislative Analyst’s Office issued a report saying total payroll expenses for the state were lower than CalPERS’ estimate. The actual figure is used to determine the state’s contribution to pension benefits.
“If we defer these contributions, it will mean larger increases are needed in the future,” Alan Milligan, interim chief actuary for CalPERS, told the board. “We feel that may end up being more challenging than what the state is facing today.”
CalPERS staff said much of the increased contribution would be paid by fee-based agencies, including the Department of Motor Vehicles and Department of Transportation. The full board is expected to consider the issue Wednesday.
In April, a key CalPERS committee voted to increase the state’s contribution by an additional $600 million. The fund says it needs the extra cash because of investment losses and retirees’ longer lifespans.
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Citing the state’s fiscal condition, the full CalPERS board postponed a final decision after state Treasurer Bill Lockyer requested more information about how the increased contributions would affect the state general fund.
“The $600 million would have had a pretty burdensome impact on a budget that’s already under an intense amount of strain,” said Joe DeAnda, spokesman for Lockyer, a CalPERS board member. “The results came in, and the hit to the general fund turned out to be a lot less hurtful.”
The legislative analyst’s report said the total increase in funding from the state would be $481 million, with about $184 million coming from the state general fund. The rest would be paid in part by the fee-based agencies.
“It’s the right thing to do,” Andrea McCarthy, a spokeswoman for Gov. Arnold Schwarzenegger, said in an e-mailed statement. “CalPERS is clearly recognizing that deferring contributions raises costs and shifts burdens to future generations, and the governor commends CalPERS’s efforts to end that practice.”
The pension fund board does not need legislative approval to boost the state’s contribution rate.