Cities across California are beginning to draft their fiscal blueprints for the next year — and for many of them, that means paying more to the California Public Employees’ Retirement System.
The percentage of payroll that the average police and fire department shells out for pension costs is expected to reach 56% by 2024, with the number of local governments paying more than 70% doubling to 59 by then. That means that for every dollar those cities spend on salaries, they’ll need to contribute at least another 70 cents to Calpers, the largest public pension in the U.S.
Those contributions are rising in part because of decisions by the pension fund’s board to absorb market losses faster and to lower the assumed investment return, which requires larger contributions from California and its municipalities to make up for the smaller projected gains. If the fund misses that 7% annual investment target, as it did for the year that ended in June and may continue to miss over the next decade, as Chief Investment Officer Ben Meng warned, that means even higher amounts from taxpayers.
“Calpers is really putting additional pressure on the cities to achieve their goal of obtaining a much higher level of funding,” said Howard Cure, head of municipal research at Evercore Wealth Management. “It’s the right, prudent thing to do, but it’s a burden on these cities.”
Read the whole article in Bloomberg.
This article quotes selections from “For Many California Cities, New Year Brings Higher Pension Bills” by Romy Varghese in Bloomberg.