Well, maybe there's nothing from CalPERS that should shock any of us, but it is bizarre that the nation's largest retirement fund uses a 3.8 percent rate of return when it has to pay local plans that want to jump ship, whereas it insists that a 7.75 percent rate of return is great when taxpayers are at risk. I first wrote about this for PSI last week and then followed up with my newspaper column on the same topic over the weekend:
When the taxpayer is backing up the entire liability for the pensions received by members of the California Public Employees Retirement System, then CalPERS officials are exuberant about the stock market. They insist that a predicted rate of return of 7.75 percent is perfectly realistic.
When their own funds are on the line, however, CalPERS can be extremely conservative as it embraces one of the lowest annual return rates imaginable: 3.8 percent.
In essence, the state's largest pension system has admitted - through its actions, though not its words - that the most vociferous pension critics have been right all along. Yes, the pension debt is much higher than CalPERS has declared, and its assumed rate of return on its investments is much more optimistic than it should be. CalPERS quietly conceded this reality when it changed the way it handles local governments that want to exit the CalPERS fund. Some localities want to leave as CalPERS wallows in unfunded liabilities and faces scrutiny over allegations of corruption and cronyism.
The response from union members was typical. As one retired fire chief wrote, after launching into a tirade about the evils of Wall Street:
No, respectfully Mr. Greenhut, I do not want to be part of your misery by being dumped into Federally controlled Wall Street retirement. Then I would be miserable like you are. ... I understand your frustration but tell the story to the California taxpayer with honesty and quit whining about how you got such a rotten deal in life. Hey, perhaps the County is hiring??
Translation: I got mine, so too bad! Well, at least until the money runs out!