Big Labor's legacy costs are busting state and local budgets in California.
PETALUMA, Calif. (KABC) -- State and local agencies are bracing for higher pension bills after the state's public employees retirement system reported a dismal return on investments. And the news is giving fuel to pension-reform advocates who say the system needs to be fixed before the state goes bust.
The California Public Employees' Retirement System (CalPERS) held a meeting Tuesday. Investment managers at the meeting said they know they have to use new strategies. Taxpayers are counting on it.
"One percent is positive but it's far below our target return of 7.5 percent," CalPERS Chief Investment Officer Joe Dear.
Blame it on the European debt crisis and the slowing of global economic growth. The nation's largest public pension fund, CalPERS, made a measly 1 percent rate of return this past year. The rate is critical because taxpayers make up any shortfall whenever public pension funds miss their mark.
Despite a 7.7 percent return over 20 years, CalPERS acknowledges it'll be asking for more money from future budgets.
"In a year, the state contribution rates will be adjusted upward, and in two years local government rates will be adjusted somewhat upward," said Dear.
The state budget has been increasingly forced to give bigger contributions to meet retirement obligations.
The local bankruptcies of Stockton and San Bernardino were due in part to crushing pension debt.
Just six years ago, $1.5 billion, or 1.5 percent of California's General Fund, went to CalPERS. This year, the share jumped to more than $2 billion dollars, or about 2.5 percent of the general fund. It's actually closer to 4 percent when you add in teachers' pensions. Read more>>