Wednesday, March 23, 2011 – 11:51 a.m.

With all the justifiable concerns being raised over the state of public pension funds, it seems appropriate to look at San Bernardino County’s pension fund to see just how good or bad the situation is.

What was discovered is not good.

The actuarial assumptions which determine how well funded the pension system is, probably paint a rosier snapshot than just how bad conditions may become.

The assumptions, which determine the solvency of the system and required contribution rates, is currently based on the San Bernardino County Employees Retirement Association (SBCERA) earning a return on investment of 8.00% annually in order to maintain a level of funding necessary to pay current and future pension obligations.

The only problem is SBCERA, over the past ten fiscal years, has an average annual rate of return of just 3.236%.

A figure that is 4.764% below where it needs to be.

To find SBCERA earning 8.0% annually, one has to go back and average twenty-eight years of investment results.

A highly unrealistic and dubious approach.

California’s two largest pension funds, the California Public Employees Retirement System (CalPERS) and California State Teachers Retirement System (CalSTRS), have already reluctantly dropped their investment return assumption to a 7.75% annual rate.

Pressure has been mounting on CalPERS and CalSTRS to drop the number another notch to 7.50%.

A move that would collectively cost state and local governments billions of dollars.

So far, both funds have resisted.

Should SBCERA be forced to drop its assumed rate of return, the county in-turn would be forced to pay millions more into the system.

Money it doesn’t have.

With a volatile stock market and weak economy, it doesn’t look as if the situation is going to change anytime soon.