[quote=EconProf]CAR: if they were mostly in bonds, what would their rate of return be? Yes, that would be safer than the risky choices they are now turning to. But by getting only 3 – 5% on these safe investments they would be admitting that their “assumed” rate of 7.75% is phoney. They would be admitting to taxpayers that they are far more underfunded than they claim, and that taxpayers are on the hook for this huge unfunded future liability.[/quote]
I can’t speak for CAR, but she may be intimating here that the (’99 – ’02) CA public pension “enhancements” counted upon the higher, 7.75% return were based upon the funds investing in risky Wall Street “investments.” The “good old days” were before that, when (lower) public pensions were promised or paid out premised upon a much more conservative return based upon the funds investing in “relatively safe” investments. (I belong to a group of public pensioners in the latter-mentioned category).
Had none of the CA public pension plans elected to avail themselves of these risky investments and then simultaneously “promise” pensions based upon more generous formulas (due to the higher projected returns of the “risky” investments), they would not have fallen short of being able to fulfill their (lesser) promised benefits in the first place.
Buenrostro and Villalobos, formerly CALPERS CEO and Board member, respectively, were indicted with accepting bribes from Wall St investment houses in exchange for investing $255 billion in CALPERS employee and employer contributions with same houses and undoubtedly losing a good portion of it. If the charges are proven to have actually happened, these two deserve whatever is coming to them.
I find it a sad commentary that two officers of CALPERS, at least the second of who was voted in by the membership and placed in a position of trust, could grossly and criminally mishandle the funds under their supervision for their own personal gain. Their past actions could seriously jeopardize the pensions that 1.6M present and future CA public retirees and their families are counting on after a decades of faithful hard work.
