CalPERS Sets CA State Pension Payment

June 15, 2010 (PLANSPONSOR.com) – The State of California will pay approximately $3.9 billion next year for state employee pensions starting July 1, 2010, up from $3.3 billion.

A news release from the California Public Employees’ Retirement System (CalPERS) said the Benefits and Program Administration Committee approved a $600-million increase, which goes to the full CalPERS Board for final action.

It is possible the actual increase may be as low as $481 million, based on more recent, lower payroll estimates provided by the State’s Legislative Analyst’s Office (LAO). The LAO estimates the actual increase to the State’s general fund budget will be $184 million. The rest of the increase will be paid with revenues generated by self-funded agencies, not general fund tax revenues, the news release said.

The total contribution increase is attributed to two key factors, according to CalPERS:

  • Approximately $299 million to adjust for a recent demographic study that found CalPERS retirees living longer and workers retiring slightly earlier.
  • $217 million in additional contributions to compensate for investment losses during the recent recession. The value of the CalPERS pension fund declined by 24% for the 12 months that ended June 30, 2009.

“The increase is equivalent to about two-tenths of one percent of the State’s general fund budget,” said Alan Milligan, CalPERS Interim Chief Actuary, in the news release. “While any increase is difficult during these challenging economic times, this amount is relatively small in comparison to total State spending.”

The action follows last month’s request by State Treasurer and CalPERS Board Member Bill Lockyer to postpone final action on next year’s State rate increase so that CalPERS staff could analyze the impact of deferring the contribution increase given the State’s current budget situation. Lockyer withdrew the request (see CalPERS Contribution Request Back On ).

CalPERS adjusts employer contribution rates every year based on whether the pension fund experiences actuarial gains or losses.  CalPERS employer rates are based on an assumed long-term annual average investment return of 7.75%. 

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