Leaders of the California Public Employees' Retirement System voted this afternoon to speed up payments on the fund's long-term liabilities with an accounting change that will trigger higher contributions of up to 50 percent from taxpayer-funded state and local governments and school districts over the next few years.
The matter will go to CalPERS' full Board of Administration on Wednesday, which will likely approve it.
The new policy will shrink the fund's asset "smoothing" period from the current 15 years to five years. Smoothing gains and losses avoids sharp spikes in the annual pension contribution rates that public employers pay with taxes and fees they collect. Critics said the 15-year period unwisely delayed a full accounting of the $100 billion CalPERS lost after the 2008 financial meltdown.
The accounting changes approved today also will amortize CalPERS' investment gains and losses over a fixed 30-year period. Fixing the amortization period obligates CalPERS to pay its obligations by a specific date. Currently, CalPERS resets the amortization period annually, essentially pushing its debts forward year after year.
The accounting changes won't hike what employees in pay toward their benefits because their contributions cover only "normal" costs, not the total $87 billion unfunded liability that their pension plans have racked up over the last several years.
it's left to employers -- and by extension, taxpayers -- to fill that gap with more money for CalPERS to invest. The policies that the board approved today will force public agencies to kick in more money for at least five years starting in 2015-16 to pay down those long-term debts.
For example, CalPERS estimates that pension contributions for state workers and school-district employees who aren't teachers will grow from about $5 billion to $7.5 billion over five years.
PHOTO CREDIT: Sacramento Metro Fire firefighters put out a grass fire near U.S. 50 and Folsom Boulevard in Folsom. Randall Benton / Sacramento Bee file, 2012