Bee colleague Dale Kasler reports in this story that CalPERS' board has approved a relatively modest bump in what the state will pay the pension fund to make up for the heavy investment losses incurred the last year or so. The payouts are based on a "smoothing" plan that spreads out over three years what the state will pay to make up for the fund's investment losses.
The board's decision sets up one more thing for Republican Gov. Arnold Schwarzenegger and Democrats in the Legislature to fight about during upcoming 2010-11 budget talks. Schwarzenegger wants to skip spreading out the payments. If he prevails, it would add at least $1 billion that lawmakers would have to scrounge up from somewhere to give CalPERS instead of $200 million under the smoothing plan.
Click the following link to read more about what the administration and unions are saying about this.
Schwarzenegger economy and jobs advisor David Crane (pictured at left) has been the administration's point man on this issue. On Wednesday he held a press conference to talk about it and on Tuesday made this comment about smoothing in a piece he wrote for SignOnSanDiego Newsletter:
Likewise, lowering payments for a year or two is not a way out of this problem. That sort of deferral - termed "super-smoothing," in CalPERS's Orwellian terms - is no different than the deceptive pay-option mortgage loans that lulled borrowers into thinking future house price appreciation would take care of accruing interest. Every such deferral is nothing but a high-cost borrowing that results in even greater cost, and the only thing smooth about it is the salesman trying to put it past you.
Click here to read the entire op-ed, which also criticizes CalPERS' investment assumptions.
Californians for Health Care & Retirement Security, a coalition of public employee unions, said inthis press release that the governor's proposal to pay up to is "nonsensical and irresponsible."
Watch for this debate to really heat up next month after the governor submits his 2010-11 budget proposal.
IMAGE: www.gov.ca.gov
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