California Cities Support a More Conservative CalPERS

Sounds like agencies are tired of falling short on investment returns.

In a survey to its members the League of California Cities (LCC) found a preference for gradual increases in costs versus the spikes that accompany rough patches in the market.

"As employers, more predictability and less spiking of rates from one year to the next is preferable," said Laguna Hills City Manager Bruce Channing.

CalPERS is considering adopting a new policy that would gradually reduce the assumed return rate by 1%, from 7.5% to 6.5% over the next few decades.

And while that reduction translates to local governments and public workers being on the hook for a larger contribution, 77% of those surveyed by the LCC supported the strategy.

There is opposition to the strategy, as Alameda Interim City Manager Liz Warmerdam described the idea of greater pension costs as being “devastating on our bottom line.” She also echoed old criticisms in the way CalPERS works with agencies, saying “We have very little input. Whatever they want to do, local governments have to sit here and deal with it. It's extremely frustrating."

Love it or hate it (you probably hate it), CalPERS is the elephant in the City Council Chambers, but as State Senator John Moorlach reminds us, “… it's the honest approach to address the large unfunded liabilities.”

More on the new strategy being considered by CalPERS can be found here.