CA: CalPERS moves to limit swings in pension costs

Sac Bee ^ | 3/16/05 | Gilbert Chan

[NormsRevenge]

A key panel of the California Public Employees' Retirement System endorsed a plan Tuesday to reduce wild swings in government contributions, following calls for a pension overhaul by Gov. Arnold Schwarzenegger and other critics.

Under the plan, CalPERS would revamp a formula used to calculate annual pension contribution rates for the state, cities and other government agencies. It would also spread investment gains and losses over a 15-year period instead of three years, as it does now.

At the same time, trustees agreed to explore legislation to create reserve accounts that government officials can tap to meet their pension payments during economic downturns.

The move comes as Schwarzenegger and the Howard Jarvis Taxpayers Association cite rising contributions as a drag on government budgets.

The governor wants to end guaranteed pension benefits for future public employees and replace them with 401(k)-style accounts that limit the state's contribution. He has asserted that taxpayers shoulder a greater share of the pension burden benefits during stock market downturns.

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The issue goes to the full CalPERS board today and a final decision is expected in April.

"It is literally about budgets," said Ron Seeling, chief actuary for CalPERS, which serves 1.4 million government employees and retirees. Employee and employer groups, he said, are saying: "Don't let us go back to contributing zero."

State and local government employers - from cities to library districts - benefited from hefty investment returns during the unprecedented bull market in the 1990s.

Flush with a surplus, many agencies and the state wound up making no pension contributions for one or more years. But a prolonged bear market socked CalPERS with a string of stock market losses, and employers were suddenly hit with substantial increases in pension plan payments.