Editorial: CalPERS Must Do More

Kudos to the California Public Employees Retirement System for finally acknowledging what many others have known for so long. After a series of rosy assessments, CalPERS finally cut its earnings forecast by a half percentage point last month, a “monumental” move aimed at keeping the system sound. But more must be done, writes Dan Walters in a hard-hitting editorial for the Sacramento Bee. And soon.

“Reducing the ‘discount rate’ to 7 percent will force employers, and perhaps employees, to kick billions of more dollars into the system to slow the growth of CalPERS’ ‘unfunded liabilities,’ as the $150-plus billion debt is termed,” Walters writes. “However, the extra contributions generated by lowering the discount rate will not erase that debt, which is likely to keep growing if CalPERS’ investment earnings continue to fall short, as many economists expect.”

The discount rate should have been lowered at least another percentage point, he says, but that would have thrown cities and other local governments into an absolute tailspin—and probable bankruptcy.

“All in all, therefore, while reality did make a rare visit to the CalPERS boardroom, its impact fell well short of what is needed to make the public employees’ pension system actuarially sound.”

Read the full editorial by Dan Walters here.