By Ed Mendel
Monday, January 17, 2017

State payments to CalPERS next fiscal year are expected to total $6 billion, nearly double the $3.2 billion paid six years ago before a wave of employer rate increases.

A new state budget proposed by Gov. Brown last week also shows that state payments to CalSTRS for the fiscal year beginning in July are expected to be $2.8 billion, nearly double the $1.5 billion paid three years ago when a rate increase began.

Meanwhile, what had been the fastest-growing annual retirement cost in the budget, retiree health care for state workers, only increased by about half during the last six years, going from $1.5 billion in fiscal 2011 to $2.2 billion next year.

State payments to the California Public Employees Retirement System will continue to grow under a decade-long series of rate increases. For the California State Teachers Retirement System, state payments are expected to flatten and possibly decline.

Pension rates are a percentage of pay. So, in addition to the rate increases, some of the growth in state pension costs is due to an increase in pay and employees during the recovery from the deep economic recession.

The CalPERS and CalSTRS investment funds, however, have not recovered from huge losses ($100 billion for CalPERS) during the recession and a stock market crash nearly a decade ago in 2008.

Last week, CalPERS had an investment fund valued at $306 billion and about 64 percent of the projected assets needed to pay future pensions. The CalSTR investment fund was valued at $193 billion last November and was 69 percent funded as of June 30, 2015.

Both of the big pension systems expect their investment fund earnings to pay roughly two-thirds of future pension costs. The rest of the money will come mainly from the state and local governments with a smaller amount from employees.

After state payments stayed around $3 billion for four years, CalPERS adopted rate increases three years in a row: a lower earnings forecast in 2012, a more conservative actuarial method in 2013, and a forecast of longer live spans for retirees in 2014.

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