Yesterday, Dan Pellissier from the California Foundation for Fiscal Responsibility reported some selective facts about public pensions in the Capitol Morning Report and in recent newspaper opinions. At CalPERS, we recognize that rising pension costs are a source of economic concern for the State and local governments that are struggling with the impacts of the economic downturn. However, it is important that as we discuss long-term solutions for public pensions, the window into pension facts is crystal clear.
Here are some additional questions and answers to consider:
Q: How much more are State employees contributing to pensions this year?
A: Through collective bargaining agreements reach so far, State employees are paying an additional 2-5 percent more from their paychecks toward pensions, saving the State budget $300-$400 million.
Q: How have CalPERS investments fared recently?
A: CalPERS investment portfolio has gained more than $65 billion since the fund’s low point during the financial crisis. The fund has earned two straight calendar years of double-digit gains.
Q: Are the liabilities of the State’s public pension systems $700 billion?
A: No. The Stanford study that makes this claim conjures up this figure by assuming investments in only low interest bonds to produce higher liabilities. The fact is that CalPERS has earned an average annual investment return of 7.9 percent for the last 20 years.
Q: What’s misleading about the fact that State and local government pension contributions increased from $362 million in FY 1999-00 to $6.9 billion in FY 2009-10?
A: It’s a selectively cropped picture. The $362 million figure was an unusually low contribution not a typical contribution. For example, employer contributions in the previous 10 years before FY 1999-00 ranged from $1.4 billion to as high as $2.3 billion. Total contributions today are about the same percentage of payroll as they were 15 years ago. It should also be noted that the majority of pensions are paid by investments – historically as high as 75 cents of every dollar.
Q: Are CalPERS members breaking the State?
A: About 3 percent of total State spending goes to the cost of pensions. The majority of the State’s budget cost is earmarked for public education, higher education, and corrections. Even if there were no pensions, the State would still have a large deficit.
CalPERS is working hard to ensure the retirement and health security of our members, provide help to our employers, and manage our investments to meet our long-term liabilities. We hope this information provides education, insight, and clarity.
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