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Real Pension Liablity to Hit Home?
SacBEE Pension Fund Bombshell
The Governmental Accounting Standards Board has dropped a bombshell
with preliminary new rules that, if adopted, would force governments
to increase projections of pension liabilities by using tighter
"discount rates" – effectively, lower assumptions of pension fund
The huge California Public Employees' Retirement System, the
California State Teachers' Retirement System, the University of
California Retirement System and dozens of locally managed pension
funds would no longer be able to minimize unfunded liabilities by
adopting rosy scenarios of future earnings.
Gov. Arnold Schwarzenegger, through his financial aide, David Crane,
has waged a war of words with the union-controlled Cal- PERS, alleging
that the nation's largest public pension fund has been lowballing its
Schwarzenegger has said he won't sign a new state budget without
pension reforms of some kind. A few days ago, the administration
reached agreement with four state worker unions on some mild pension
changes mostly affecting new workers...
The governor and Crane have touted a Stanford University study
suggesting that, in calculating future pension obligations, the three
state retirement systems stop using a discount rate that's the same as
their assumed rates of annual earnings return, 7.5 percent or higher.