CalPERS

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CalPERS sticks to assumed rate of return above UC’s

Byuclafaculty

A prior post noted that CalPERS might lower its assumed rate of return on investment to 7.5%, the same as UCRP. What CalPERS might have done would have had no direct effect on UC, but it would have deprived us of being the more conservative. Now that won’t happen, according to the press release below:CalPERS Discount Rate Unchanged Press Release March 15, 2011 External Affairs BranchPatricia K. Macht, DirectorBrad Pacheco, Chief, Office of Public AffairsContact: Edward Fong, Information Officer CalPERS Discount Rate Unchanged Assumed Investment Return Rate to Stay at 7.75 Percent SACRAMENTO, CA – A key committee of the…

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CalPERS reported to be planning to cut its assumed investment return to seven and half

Byuclafaculty

Pension funds, such as UC’s, use an assumed rate of return to estimate future earnings and calculate their unfunded liability. In the past, UC has had the most conservative rate of 7.5% as compared with CalPERS and CalSTRS. It was useful for UC to be able to note that it was more conservative than the others. Now it is reported that CalPERS will cut its assumed rate to the same level as UC, i.e., CalPERS will assume that for each dollar in the fund, it can earn seven and a half cents. Although there is no direct effect on UC…

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Gov. Brown Removes Controversial “Stanford Study” Author From CalSTRS Board

Byuclafaculty

Readers of this blog will know of the so-called “Stanford Study” which was designed to produce the largest possible estimate of the unfunded liability of the three major state pension funds: CalPERS, CalSTRS, and UCRS. Money & Company blog, LA Times Governor pulls two teachers pension fund appointees (excerpt) February 22, 2011 Gov. Jerry Brown has pulled back two controversial, last-minute appointments made by then-Gov. Arnold Schwarzenegger to a state teachers pension board. On Dec. 31, Republican Schwarzenegger named Steven Kram, 54, of Los Angeles and Cameron Percy, 26, to the California State Teachers’ Retirement System, a $150-billion pension system.Kram…

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Observations and Worries Over at CalPERS

Byuclafaculty

The excerpt below from calpensions.com deals mainly with a state contribution cut to CalPERS, ostensibly due to increased employee contributions. Some things to note: 1) the state contribution rate to the plan is already roughly at our “normal cost.” 2) CalPERS may come down to UC’s assumed 7.5% rate of expected earnings – or possibly lower. Lower would put pressure on UC to do the same. 3) CalPERS is concerned about federal legislative proposals in the new Congress regarding public pension plan discount rates used for estimating unfunded liabilities. CalPERS state rate hike cut by $200 million (except) Ed Mendel,…

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Optimistic CalSTRS Board Lowers Its Assumed Rate of Return But Not All the Way Down to Our 7.5%

Byuclafaculty

Since CalSTRS’ new assumption is still above ours, we can claim to be more conservative in our pension funding planning. See below: CalSTRS lowers forecast on future investment returns (excerpt) Dec. 3, 2010, Dale Kasler, Sacramento Bee After agonizing for months, CalSTRS made a decision Thursday that seems subtle but has enormous financial implications. The teachers’ pension fund agreed to lower its long-term forecast of future annual investment returns by a quarter of a percentage point… On an 8-3 vote, the board of the California State Teachers’ Retirement System agreed to cut the investment return forecast to 7.75 percent a…

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CalPERS & CalSTRS Profited from Fed’s TALF Program; UCRS Did Not Participate

Byuclafaculty

State pension funds reaped rewards from Fed loan program (excerpt) Dec. 3, 2010, Dale Kasler, Sacramento Bee CalPERS was among the big winners in an obscure Federal Reserve loan program aimed at rescuing the nation’s troubled credit markets last year. The state’s other big pension fund, CalSTRS, also participated in the program, but to a much smaller degree, according to records released this week by the Federal Reserve. …(T)hey and other big investors took advantage of a $70 billion Federal Reserve loan program designed to pump money into the consumer and business lending markets. CalPERS, in fact, was among the…

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CalSTRS can apparently wait to cut its estimated investment return to UC level

Byuclafaculty

From the Sacramento Bee: The CalSTRS board Friday postponed a crucial decision on reducing its investment-return forecast because two of its members were absent. Jack Ehnes, chief executive of the California State Teachers’ Retirement System, said the board wanted every one of its 12 members present for the decision. The vote is now set for Dec. 2. CalSTRS’ staff has recommended that the forecast of annual returns be cut by half a percentage point, to 7.5 percent… Note that if CalSTRS and CalPERS eventually go to our 7.5%, we can no longer claim to be more conservative than the two…

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Ongoing CalPERS Scandals Make It Tougher for UC

Byuclafaculty

UC’s pension plan has nothing to do with CalPERS. But CalPERS has had a series of scandals involving conflict of interest, bribery, and bad investments that tend to tar all public pensions in California including ours. CalPERS’ ongoing problems will complicate UC’s efforts to resolve its own pension unfunded liability. Continued unraveling of CalPERS scandals increases the chances that UC will be dragged into some statewide reform for all public pensions. The latest CalPERS scandal is reported today: CalPERS investment officer linked to bribery scandal resigns Thursday, Aug. 26, 2010, Sacramento Bee (Excerpt) A senior CalPERS investment officer resigned today…

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Governor’s Pension Symposium of July 8

Byuclafaculty

Governor Schwarzenegger ran a public pension symposium on July 8. It was essentially a panel of academics, legislators and former legislators (including former assembly speaker Willie Brown), local officials, past CalPERS members, and academics. You can see a video of the roughly 1-hour symposium by going to the governor’s website: www.gov.ca.gov and clicking on “multimedia.” The symposium concentrated on CalPERS and, to a lesser extent, CalSTRS. UCRS was mentioned in passing at roughly minute 39, but was not explicitly discussed. In particular, the important $2-for-$1 issue that separates UCRS from other public pensions in California was not discussed. (Approximately $2…