Confusion over CalPERS calculations raises questions on funding

In a recent government meeting, officials discussed the complexities surrounding the city's pension liabilities and investment returns, particularly in relation to the California Public Employees' Retirement System (CalPERS). The conversation highlighted significant fluctuations in the city's Unfunded Actuarial Liability (UAL), which currently stands at approximately $42.5 million.

The meeting revealed that the fiscal year ending June 30, 2022, saw a negative investment return of 6.1% for CalPERS, contributing to the current UAL. In contrast, the previous fiscal year had a robust return of 21.3%, which had temporarily reduced the UAL from $218.6 million to $163 million. However, the timing of payments and valuations has led to confusion among officials regarding the actual figures and calculations.

Officials noted that while the city made a substantial payment of around $250 million to CalPERS, the lingering UAL raises questions about the accuracy of the calculations provided by CalPERS. The discussion emphasized the importance of understanding the actuarial reports, which reflect a smoothing of investment gains and losses over time, potentially obscuring the immediate impact of investment performance on the UAL.

The meeting also touched on the upcoming valuation report expected in late July or early August, which may indicate a slight increase in the UAL. Officials expressed a desire for clarity on how the UAL is calculated and the factors contributing to its fluctuations, particularly in light of the significant investment losses experienced in the last fiscal year.

As the city navigates these financial complexities, officials plan to invite a CalPERS representative to a future meeting to address lingering questions and provide further insight into the calculations and assumptions underlying the pension liabilities.