Photo: Courtesy of CalPERS
The governing board of CalPERS, California’s largest public pension system, has chosen to leave its annual rate-of-investment-return outlook unchanged.The decision goes against a recent recommendation from the fund’s chief actuary to lower the forecast by a quarter of a percentage point, from 7.75% to 7.5%.
The board appears to have bowed to pressure from local government officials, who pushed fiercely for CalPERS to keep the assumed rate of investment return unchanged, the Sacramento Bee reports. A lower discount rate would have forced municipalities to increase annual CalPERS contributions by hundreds of millions of dollars.
Critics argue that overly optimistic earnings projections have left the $228 billion public pension fund with huge unfunded liabilities. The Wall Street Journal’s David Reilly notes that if CalPERS fails to meet its expectations again, California will sink even deeper into a financial quagmire. The state’s public pensions are currently underfunded by about $475 billion.
In addition to its pension liabilities, California faces $59.9 billion in unfunded retiree healthcare obligations, according to a new report from the state Controller’s Office. The report finds that the unfunded cost of retiree health and dental care grew by $8.1 billion in just one year.
NOW WATCH: Briefing videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.