Capitol Alert

CalPERS contributions to rise more than 9 percent

CalPERS’ latest rate increase will cost state government and local school districts nearly $600 million.
CalPERS’ latest rate increase will cost state government and local school districts nearly $600 million. Sacramento Bee file

CalPERS is about to raise pension contribution rates again, this time by more than 9 percent, a move that will cost state government and local school districts nearly $600 million.

The increases are the latest step by CalPERS to gradually shore up its finances. In early 2014, CalPERS said it would embark on a series of significant rate hikes, and on Tuesday the pension fund’s finance and administration committee recommended higher rates for the upcoming fiscal year.

While CalPERS is continuing to deal with the lingering effects of the 2008 crash in the financial markets, it pinned the latest rate hike primarily on growth in government payrolls and recent demographic assumptions that show retirees living longer.

“As the fund matures, and the retired population grows, it’s important that the rates reflect the changing demographics of our members,” said committee chairman Richard Costigan in a prepared statement. The rate increases are also prompted in part by a 2-year-old policy under which CalPERS recognizes the financial impact of investment losses more quickly than before.

Nonetheless, the California Public Employees’ Retirement System said the increases are smaller than originally anticipated. Spokeswoman Amy Morgan said the rate hike was moderated by the pension fund’s strong investment returns of 18.4 percent in the fiscal year that ended last June.

If approved by the full CalPERS board Wednesday, the state’s annual contribution would increase by $487 million, to $4.75 billion, an increase of about 11 percent. The contribution from school districts would increase approximately 9 percent, or $111 million, to a total of $1.34 billion a year. California teachers have their own pension fund, but school employees other than teachers get their retirement plans from CalPERS.

The CalPERS board will vote in the fall on higher rates for participating cities, counties and other local government agencies. Those rates will take effect with the fiscal year starting July 2016.

Call The Bee’s Dale Kasler, (916) 321-1066. Follow him on Twitter @dakasler.

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