The Legislative Analyst's Office has released its recommendation for the state's 2010-11 CalPERS pension contributions, including an assessment of the fund's decision on Wednesday to delay acting on a recommendation to raise employer rates:
The state's pension plans face huge unfunded actuarial accrued liabilities that will pass significant and increasing annual costs onto future taxpayers. Delaying implementation of needed rate increases to 2011-12 or beyond will pass more of these costs to future years and probably will result in even higher costs for taxpayers, given the lost opportunity of CalPERS to invest those contributed funds sooner. In effect, delaying implementation of rate increases will result in the state's General Fund and other funds borrowing hundreds of millions of dollars for one or more years at an assumed annual interest rate of 7.75 percent (CalPERS' assumed annual investment return). We recommend that the Legislature request that CalPERS provide a detailed estimate of how any delay in implementing needed contributions will increase future state costs and describe how any delay of this type is consistent with the fiduciary and constitutional responsibilities of the CalPERS board.
Click here to read more LAO analysis, including its assessment that CalPERS actuaries have overestimated how much more employers need to contribute and that the rate hike will not increase the general fund's 2010-11 budget deficit, since the expense will be borne largely by special funds departments.
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