State pensions will cost government employers about $200 million more in fiscal 2016-17 than expected next year, according to a new report from the Legislative Analyst's Office. About half of those rising costs will hit the general fund.
The chart above comes from page 40 of the LAO report released this morning. It depicts California's general fund employee retirement expenses past, present and future.
Here's a slice of what the report says:
Our forecast reflects current-law increases in the state's annual payments to (1) pension programs for state and CSU employees, (2) teachers' pensions, (3) state and CSU retiree health benefit programs, and (4) pension programs for judges. (The teachers' pension program is administered by the California State Teachers' Retirement System, and the other three programs are administered by CalPERS.)
CalPERS Contributions Driven by Pay Raises, Investments, and Actuarial Methods. Our forecast assumes that the state's required contribution to CalPERS for state and CSU pensions rises from $3.6 billion (all funds) in 2011-12 to $3.8 billion in 2016-17. (Of the $3.6 billion to be contributed in 2011-12, about $2.1 billion is expected to be paid from the General Fund. This General Fund contribution grows to $2.2 billion in our forecast in 2016-17.) This assumes that CalPERS does not change its current actuarial rate-setting practices (including rate "smoothing") and that in 2012-13 and beyond, CalPERS investment returns hit the system's assumed investment target of 7.75 percent per year. Moreover, it assumes only the pay increases for state workers that are included in current MOUs -- for most, a single 3 percent or 4 percent pay increase during the entire five-year forecast period. The forecast assumes that state workers continue to pay more in contributions to CalPERS throughout the forecast period, as agreed in collective bargaining agreements that were approved during the past year.
These various forecast assumptions limit the growth of the state's CalPERS contribution rates in our model. If, by contrast, pay raises were to rise faster than we assume, investment returns were to be significantly less, and/or actuarial methods of CalPERS were to change, the state's required payments to CalPERS could be hundreds of millions of dollars more than we forecast in 2016-17.
Click here for more about the LAO report on our sister blog, Capitol Alert.
CHART: From "The 2012-13 Budget: California's Fiscal Outlook" / Legislative Analyst's Office
The Author
About Comments
Reader comments on Sacbee.com are the opinions of the writer, not The Sacramento Bee. If you see an objectionable comment, click the "report abuse" button below it. We will delete comments containing inappropriate links, obscenities, hate speech, and personal attacks. Flagrant or repeat violators will be banned. See more about comments here.