On the heels of learning that three California cities either have, or are considering filing for bankruptcy, yesterday’s USA Today had an interesting blurb on Calpers, California’s pension trust fund. I will quote it in its entirety.
The nation’s largest public pension fund reported a dismal 1% return on its investments, a figure far short of projections that will likely add pressure on California’s state and local governments to contribute more, officials said Monday. The California Public Employees’ Retirement System reported its returns for the fiscal year that ended June 30. The return is well below its projected annual return of 7.5%. [emphasis supplied]
Let’s break this down.
First, how can any responsible entity project annual returns of 7.5% in this economy? I suppose anyone can project anything, but the key word in that question was “responsible”.
Second, because of this, I’m sure, “unexpected” shortfall, there will be “added pressure on California’s state and local government to contribute more”. Of course they will have to contribute more. How else do you make up for the millions of dollars of “shortfall” caused by the ridiculous assumptions used by the state?
And finally, where will those “more contributions” come from? The state doesn’t print money. It can’t borrow the money, as very few, if any, sane people would lend California the money for this purpose. And, from a state that just approved a high speed rail (that it can’t afford) from nowhere to nowhere, it’s not likely California will cut its spending to make up the shortfall.
Oh, wait, I forgot, the taxpayers will do it.
California isn’t alone.
Call your governor’s office and ask three simple questions. How much did you project your public employees’ pension fund would earn its last fiscal year? How much did it earn? And, how do you propose to make up the shortfall?
That should be an interesting conversation.