Further Discussion: A note about public pension fund investment return targets


Further to this discussion, an organization named “PensionFacts” (PF) today provided a very helpful example.

In this Twitter item, PF reports that CalPERS averaged a 7.5% annual return for the 20 years comprising 1993-2013:


However, PF didn’t include a chart showing change in liabilities or funded ratio over that same period. For that, first visit this CalPERS Comprehensive Annual Financial Report (CAFR). On the top of page 48, you will see that, in 1993, the Unfunded Accrued Actuarial Liability (UAAL) was $2.720 billion and the funded ratio was 96%. By 2013, as you can see on page 121 of this CAFR, the UAAL was $93 billion and the funded ratio was 75%.

In other words, despite averaging an investment return of 7.5% per annum for 20 years, the UAAL grew $90 billion and the funded ratio declined 21 percentage points.

This year tens of billions of dollars will be diverted from local, school district, special district and state services in order to fund UAAL’s related to pension promises hidden by deceptive accounting. More new promises deceptively accounted for are being made every day. As I said in a speech earlier this summer at NYU Law School, deceptive accounting is theft. The people who sign off on that accounting should be held accountable for those thefts.

Feel free to inquire with any questions or comments.