By Dale Kasler
Published: Wednesday, Mar. 16, 2011 – 12:00 am | Page 8B
For months, CalPERS has been leaning toward reducing its forecast of annual investment returns – a move that would have forced state and local governments to pour millions more into the troubled pension fund.
Now CalPERS is backing away from the idea.
Faced with protests from cash-strapped local governments, the CalPERS benefits and program committee voted Tuesday to keep the forecast at 7.75 percent.
The staff of the California Public Employees’ Retirement System had proposed reducing the forecast a quarter-point, to 7.5 percent, in anticipation of continued weakness in the market.
CalPERS would have had plenty of company. Many public pension funds have lowered their forecasts lately. CalSTRS, the teachers’ retirement fund, reduced its forecast a quarter-point in December to 7.75 percent.
A lower investment forecast puts a higher burden on taxpayers to support the pension system – a sensitive issue at a time when many Republican lawmakers want to reduce pension benefits. As it is, taxpayers are already contributing more to CalPERS to make up for disastrous investment losses in 2008.
If the CalPERS investment forecast did fall by a quarter-point, contributions would increase even more – over $400 million for the state, millions more for local governments.
Officials from the East Bay to Orange County complained to the committee about the higher burden. Richard Jacobs, the city of Orange’s finance director, said his city was facing another $2.5 million a year in costs.
“Local revenues are stagnant and the state is in the midst of a huge financial crisis,” Laguna Beach City Manager John Pietig said in a letter to CalPERS. “Laguna Beach has already eliminated several positions and is looking at additional reductions.”
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