Posted on 03/25/2011 7:55:51 PM PDT by Kaslin
Pensions: "Live in the past, borrow from the future" could be the motto for public retirement funds. Their forecasts are tinted by '90s nostalgia, and they favor short-term politics over the advice of actuaries.
If only we all could make money the Calpers way. The California Public Employees Retirement System, at $227 billion the nation's biggest public-worker pension fund, gave state and local governments a gift worth several hundred million dollars earlier this month. It did so without writing a check or otherwise spending a penny.
All it did was decide against changing a single, but crucial, number — its expected annual investment return. By a 10-to-3 vote, the Calpers board on March 16 voted to stick with a forecast of 7.75%. Its chief actuary had recommended taking the number down a notch to 7.5%.
Calpers, already inclined to side with public unions, also got an earful from local governments warning of more budget pain if the return rate were lowered.
So it shifted more risk to future taxpayers in order to ease everyone's short-term pain. And as little as a quarter of a percentage point sounds, it can translate into significant money. Gov. Jerry Brown, expecting a Calpers cut to 7.5%, had increased the state's contribution to Calpers by $400 million in his new budget. Now much if not all of that hike can be rolled back.
This is getting to be common. Last December, California's State Teachers Retirement System (CalSTRS) cut its forecast return from 8% to 7.75%, but its actuary had advised a cut to 7.5%.
And California's plans are far from unique in sticking with their rosy scenarios.
Among large public pension plans in the U.S., 8% is the most common choice for a return rate, and some plans expect as much as 8.5%.
(Excerpt) Read more at investors.com ...
I don’t have even a bachelor’s degree but at least I’m familiar with reality. How is it that these people with Master’s and PHD’s aren’t familiar with reality?
No matter what what political philosophy Man rules himself with greed always wins.
This why The Bernank has got to keep the market rising. If he doesn’t, these pension funds will implode.
Yep....and multiplied by the no. of state/fed/county/local govts. in the country ......forced “bailout” 08. Who was invested in MBS in 08? In the market 08?
Artificial propping. For who’s products are really: 1. clearing the shelves now, and 2. at todays prices?
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