Fact:SB 400, passed by the State in 1999, was the first change in benefits to State employees in 30 years. It was a result of contract negotiations between public employee unions and the Governor and followed four years without a pay raise. The CalPERS-sponsored improvements were designed to resolve inequities in the System. CalPERS priced the cost of the benefit enhancement at $400 - $600 million (equal to a 2 percent pay raise.)
Years of double-digit returns reduced employer contributions to zero for a short time. At that time, CalPERS plans were extremely overfunded, and funding surpluses were expected to cover the additional costs if investments met the actuarial assumed rate of return. No one predicted the calamitous economic events of 9/11, severe stock market fall, or the systemic regulatory failure that has rocked financial markets worldwide.
There are many other public accounts of the cost of SB 400 benefits. The Los Angeles Times reported in 1999 that the cost of SB 400 could be $600 million; and CalTAX, in a letter to the Legislature, reminded lawmakers that if markets were to falter severely in the future, employers would again be paying more in contributions.
» More