California Retirement Fund is facing a Shortage

It has been recently revealed that the California Retirement Fund is facing a shortage. As a result, the taxpayers have to find a way to deal with it and make up for the losses. Critics say that too much focus on the retirement funds is the reason why the other necessities like schools and public safety are taking a backseat in the recent times.

retirement benefits

Repercussion of The fact that California Retirement Fund is facing a Shortage

The major repercussion of the fact that the California Retirement Fund is facing a shortage is that the money from the state’s General Fund would be used to fill the gap. The General fund is supported by the taxpayers. It also means that the Caltrans and DM workers would be required to pay more along with the firefighters as the California Public Employee Retirement System or CalPERS is about 68 percent funded.

More Side Effects

A major side effect due to the fact that the California Retirement Fund is facing a shortage is that CalPERS has lowered the rate of return from 7.5 to 7 percent. It again signifies that the taxpayers would be responsible for billions of dollars in higher contributions every year. It includes state workers as well as the school districts. For those who don’t know, the CalPERS is worth $303 billion but it is $111 billion short of what’s needed to pay the pensions in the future.

Why California Retirement Fund is facing a shortage?

The main reason behind the fact that the California Retirement Fund is facing a shortage is that the investment returns are way below the expectations. Richard Costigan who serves on the CalPERS Board of administration stated that trying to forecast the returns is somewhat like a crystal ball. He also said that they have got to make sure that the fund is solvent so that the deserved benefits can be paid. As a result, the state workers who were hired post 2013 will be paying 1 to 3 percent more out of their own paychecks for the retirement.

Critics’ Opinion

Dan Pellissier of the California pension reform believes that just because the California Retirement Fund is facing a shortage, it does not mean that other critical needs should go unfunded. He said that in the recent times, the retiree healthcare costs have been taking the biggest budget pie every year which is taking away the attention from other necessities like roads, public safety, and schools.