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Tuesday, July 17, 2012

CalPERS Reports 1% Profit, Falls Short of Previous Estimates

On Monday, CalPERS reported a 1% annual profit on its investments for the fiscal year ending June 30, the Sacramento Bee reports.

The earnings are significantly less than the 7.5% profit that the public pension fund had previously forecasted (Kasler, Sacramento Bee, 7/17).

According to the San Francisco Business Times, low interest rates, weak economic growth and poor stock market returns from outside managers contributed to the low earnings (Calvey, San Francisco Business Times, 7/16).

Implications

The low earnings likely will prompt the fund to impose higher contribution rates on the state and participating municipalities.

According to the Bee, this could create additional stress for public agencies throughout California that already have financial problems (Sacramento Bee, 7/17).

CalPERS Considers Rebidding Health Care Contracts

Last month, CalPERS announced that it is seeking to reduce costs with a plan to raise health insurance premiums by an average of 9.6% next year for 1.3 million public employees, retirees and their families.

The 9.6% hike in health insurance premiums is one of the largest increases in recent years and more than twice the 4.1% premium increase that took effect this year.

In addition, CalPERS likely will rebid its health insurance contracts this fall (California Healthline, 6/28).

Broadcast Coverage

On Monday, Capital Public Radio's "KXJZ News" reported on CalPERS' recent earnings report (Adler, "KXJZ News," Capital Public Radio, 7/16).

Reader Comments:
  • 1
  • 07/18/2012
  • Tom Johnson

It's understandable why CalPERS went with a 7.5%. If they had lowered that estimate it would have required greater contributions from local governmental agencies; who in turn, would have had to adjust their health benefit or pension plans in order to generate the dollars they would need to contribute. That would have angered the public employees, who contribute greatly to the election of the public officials. Thus, the public officials put pressure on CalPERS to estimate an unrealistic and unsustainable investment return. No one is willing to exercise leadership and make tough decisions. If we can expect only a 5% return (there is a mild recession, slow down of the economy, whatever you want to call it) or a 3% or even a 1% then plug that in and deal with the fall out. Perhaps we would have no "Stockton's" or "San Bernardino's" if elected officials would do what is right, not just what will keep them elected.



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