By Ed Mendel
Thursday, February 6, 2014
Gov. Brown yesterday urged CalPERS to speed up a $1.2 billion rate increase needed because workers are living longer. Assembly Speaker John Perez said last week he wants to speed up a $4.5 billion CalSTRS rate hike plan, acting this year not next year as the governor suggested.
Pay now or pay more later, a kind of pension proverb uttered by frustrated CalSTRS officials in recent years, can be a spur to action now that the state, after years of deficits and deep cuts, is projected to have a $5.6 billion reserve at the end of next fiscal year.
The California Public Employees Retirement System and the California State Teachers Retirement System, hit by huge investment losses during the deep recession and stock market crash, have roughly 70 percent of the projected assets needed to cover pensions promised over the next 30 years.
Later this month the CalPERS board is scheduled to consider a staff recommendation to begin the longevity rate increase in 2016. Following current board policy, the increase would be phased in over the following five years to pay off the new cost over 20 years.
Brown said in his letter the delay is “unacceptable” and would add an estimated $3.7 billion to the state cost over two decades. He urged the CalPERS board to adopt the new longevity changes immediately and phase in the increased rates within three years.
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