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California actually funds the pension system pretty well. At last check (2015) it was around 77% funded.
Illinois has a much bigger problem, with funding down in 40% neighborhood. Even states like Kentucky manage to do better.
That 77% figure almost certainly derives from the actuarial assumption of 7.5% returns, which pension funds typically use to calculate their funding level but almost never achieve in real life. Use a more realistic return rate based on actual historic returns and I bet that number drops below 50%.
The assumed 7.5% returns are also unrealistic. Reality lies somewhere in the middle.
However, that's true of pretty much every pension system, so it doesn't really tell us anything about California being better or worse off than other states.
That 77% figure almost certainly derives from the actuarial assumption of 7.5% returns, which pension funds typically use to calculate their funding level but almost never achieve in real life. Use a more realistic return rate based on actual historic returns and I bet that number drops below 50%.
7.5% is the realistic return rate if you buy and hold for a 30 year time frame, which is what pensions should be doing with their core portfolios.
06-24-2017, 03:05 PM
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n/a posts
Quote:
Originally Posted by Elliott_CA
7.5% is the realistic return rate if you buy and hold for a 30 year time frame, which is what pensions should be doing with their core portfolios.
And it's what they (well, at least CA) are doing, which is why the returns are much higher than the 3.5ish percent required to come up with the trillion dollar number.
It's not up at 7.5% though. If I were running things, I'd pick a realistic, but less optimistic number, just so there's some buffer if there is an extended economic downturn.
"The 2008 financial crisis was primarily caused by deregulation in the financial industry. That permitted banks to engage in hedge fund trading with derivatives. Banks then demanded more mortgages to support the profitable sale of these derivatives. They created interest-only loans that became affordable to subprime borrowers."
"In 2004, the Federal Reserve raised the fed funds rate just as the interest rates on these new mortgages reset."
"Housing prices started falling as supply outpaced demand. That trapped homeowners who couldn't afford the payments, but couldn't sell their house. When the values of the derivatives crumbled, banks stopped lending to each other. That created the financial crisis that led to the Great Recession."
"GW Bush embraced a governing philosophy of deregulation. That trickled down to federal oversight agencies, which in turn eased off on banks and mortgage brokers." But later in Bush's presidency GW Bush sought regulations to protect America's economy, but then Bush's advisers and other powerful Republicans stopped him from pursuing those things.
7.5% is the realistic return rate if you buy and hold for a 30 year time frame, which is what pensions should be doing with their core portfolios.
CalPERS on Monday announced a preliminary net return of 0.61% for the fiscal year ended June 30.
The latest fiscal-year return, coming on top of 2.4% in the prior year, means CalPERS has not met its expected 7.5% rate of return for the last 20 years, Ted Eliopoulos, chief investment officer, disclosed Monday at a press briefing on the returns.
The results also come as CalPERS' general investment consultant, Wilshire Associates, has estimated that a 7.5% return won't be achievable over the next decade. The consulting firm has estimated a 6.4% yearly return during the next 10 years.
People must have some vested interest to defend California's perpetual stupid choices.
The vested interests are from republicans who regularly attack California for being a liberal state. A state with tough environmental regulations, desires for high worker wages, and support for assisting the poor. And even though California has its problems its philosophies of a clean environment, high wages for workers and aid to the poor are important, Christian-like and American.
And there is no actual republican conversation about California and its problems. Instead republicans start source-less threads with some negative aspect about California, and then all the republicans rush in to attack California from (every) angle.
How about having actual conversation about California's problems and how to fix them? Like actual conversation about making California's tough environmental laws more business friendly, or actual conversation about improving California's worker wages without hurting businesses, or actual conversation on how California can help the poor without massive government expense?
But republicans are not here to help solve California's problems, instead republicans are here to simply attack California.
That goes BOTH ways: A LOT of "deep blue" people become more "red" when they move to our red states. lol
sez who?
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