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HUMAN RESOURCES AND PERSONNEL

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CSDA Stays Active on Public Pensions Issues

Much like 2017, we can expect public employee defined benefit pensions to be a major topic of discussion and action in 2018. The California Public Employees’ Retirement System (CalPERS) is expecting a busy year and they may be looking at some major strategic adjustments. Additionally, the Legislature will likely be introducing a myriad of bills to address pension shortfalls for employees of public agencies.

CalPERS

At the December CalPERS Board meeting the Board completed the Asset Liability Management (ALM) cycle by adopting “Portfolio Candidate C” of four potential portfolio options. Portfolio C has an asset mix that is projected to yield a 30-year blended rate of return of 7 percent. This matches the discount rate the Board adopted in 2016 (to be phased in over several years) and will not result in a further reduction in the discount rate. Therefore, based on the 2016 Board actions, the current discount rate of 7.5 percent is scheduled to be reduced slowly, referred to as “smoothing,” with the final impacts taking effect in 2025.

The Legislature

CSDA anticipates a significant amount of legislative activity in 2018 surrounding public pensions. There are currently two bills to amend the State Constitution to require a public vote at the local level to allow public entities to provide defined benefit pensions (ACA 15, SCA 10), and there is a joint hearing scheduled for January 10th for the State Senate and Assembly committees that handle public pensions entitled, “How California’s Public Pension Funds Support California Values While Fulfilling Their Fiduciary Obligations.” This hearing will look at investment and divestment policies and the impacts divestment has had on public pension funds.

Additionally, the Service Employees International Union (SEIU) has indicated that they intend to sponsor legislation that will require participating agencies in a Joint Powers Authority (JPA) to be assigned joint and several liability with respect the their JPA’s pension obligations. The SEIU proposal would assign this liability to both new and existing JPAs.

CSDA will continue to be actively involved on all fronts related to public pensions and we encourage you to do the same. If you have a background in public pensions, please consider participating on CSDA’s CalPERS Working Group where you can share your knowledge to help craft a stronger public pension system for all special districts.

Should you have any questions about this public pension update, or wish to join the CalPERS Working Group, please contact CSDA’s Senior Legislative Representative, Dillon Gibbons, at dillong@csdsa.net.

 


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