Calpers tells California cities to keep eye on pension terms
PETALUMA, California (Reuters) - California's cities should learn how to keep their pension costs in check instead of blaming the California Public Employees' Retirement System for their problems, some of the pension fund's board member said on Wednesday.
While the fund can lay out the costs of pension plans, it is ultimately up to cities to decide how much they want to pay for them, they said at a meeting in Petaluma, California.
"At the end of the day, it's their decision," said Rob Feckner, the board's president.
The fund, best known as Calpers, is the largest U.S. public pension system and manages retirement accounts for Stockton, Mammoth Lakes and San Bernardino.
Stockton and Mammoth Lakes have filed for bankruptcy in recent weeks and San Bernardino's council is considering how their city should undertake a Chapter 9 filing to seek protection from creditors.
Public pension costs are coming under increasing scrutiny and some local officials in California are blaming for the major financial problems facing municipalities.
Calpers board member Dan Dunmoyer said the fund may need to warn cities if assumptions in their pension plans are out of line. He said cities will face more financial hardship and the pension costs they have taken on as a result of commitments to their workers will continue.
The pension fund announced a 1 percent return for the fiscal year that ended in June, well below its 21 percent gain in the previous year. The fund is in the process of computing new contribution levels for local governments that will go into effect next July.
Calpers board member and California state Controller John Chiang recommended that the fund guide local governments on best practices regarding pension planning.
Chiang, whose office is looking into Stockton's financial practices, told Reuters that cities need to do a better job of thinking through their pensions policies and how they factor them into their overall finances.
Chiang also said he wants lawmakers to authorize his office to organize "red teams" of experts to look into the finances of local governments when it thinks they may be running into trouble.
"We can only go into cities now if it's seen they have problems," he said.
Calpers already reviews changes to pension plans proposed by local governments and provides them with cost analyses. The fund also provides cities and governments with scenarios for how their contribution rates could change over time depending on its returns.
(Reporting By Jim Christie; editing by Andre Grenon)
Trending On Reuters
People perform a fire dragon dance in a shower of molten iron sparks to celebrate the Lantern Festival in China, and more in our photos of the day. Slideshow