| LOS ANGELES
LOS ANGELES Feb 18 California and many of its
cities will soon be paying more for public pensions after the
state's giant retirement system voted on Tuesday to change the
way it calculates contributions.
The move by the board of the California Public Employees'
Retirement System (Calpers) - the world's biggest public pension
fund with assets of $277 billion - was welcomed by the state's
Democratic governor, Jerry Brown, who had been pushing for
Calpers to act more aggressively in how it funded the provision
of pensions for city and state workers.
But higher pension contributions are bound to be met with
angst by some California cities, which say they are already
struggling to meet Calpers's rate demands.
Pension contributions to Calpers are usually the biggest
expense for California cities that pay into the system. Two
cities in the state, San Bernardino and Stockton, are in
bankruptcy. Pension costs were a significant factor in their
The Calpers board on Tuesday voted to change funding
assumptions to reflect longer life expectancies for workers -
two years for men and 18 months for women. That will lead to
higher rates as the pension system seeks to absorb the costs of
retired workers living longer.
The board agreed to a request by Brown to hasten to this
summer an increase in the state's contribution to the fund, for
the pensions of state employees.
The rate hike will hit the California state treasury from
July 1 and will be phased in over three years, ultimately
costing an extra $1.2 billion a year and bringing California's
annual contribution to Calpers to about $5 billion.
Apparently recognizing the politically treacherous path of
hiking rates for cities immediately, Calpers voted to not change
contributions for cities, counties and other municipal entities
Rising pension costs - also a significant factor in the
bankruptcy of Detroit, Michigan - have become a lightning rod
for some lawmakers and fiscal hawks. They argue that lavish
pension deals for public workers, many of which were agreed to
by states and cities before the 2008 financial crash, are
Michael Sweet, a municipal bankruptcy attorney in San
Francisco, said higher pension costs will mean less money for
cities to spend on other public services, such as police and
"Cities seem to be asked to pay what is necessary to make
sure Calpers has the funds available to cover the pensions these
cities promised their workers," Sweet said.
Brown had argued that delaying state contributions, which
was proposed by some Calpers board members, was a false economy
and would ultimately cost California more in the long run.
"The Board today took important and responsible action to
strengthen California's pension system," Brown said in a
After the vote, Calpers, in a statement, said: "While
today's action will result in higher pension costs for the State
and...contracting employers, it helps to stabilize pension costs
over time and puts Calpers on a path to meet the pension
obligations promised to current and future public employees."