CalPERS CEO Anne Stausboll on Wednesday said her staff is in “informal discussions” with California Gov. Arnold Schwarzenegger’s administration on a proposal to borrow $2 billion from the pension fund to help the state balance its budget.
The proposal, floated by Mr. Schwarzenegger’s finance department, would mean the $205.5 billion California Public Employees’ Retirement System would credit the state with $2 billion this year as an advance on the roughly $74 billion Mr. Schwarzenegger estimates the state would save during the next 30 years from his proposals to roll back pension benefits for government workers.
California has been without a spending plan since the start of its fiscal year on July 1 as Mr. Schwarzenegger and Democrats who lead the Legislature remain deadlocked over how to fill a $19 billion deficit. The Republican governor has vowed not to sign any final budget unless it’s accompanied by legislation to permanently cut the state’s cost to finance workers’ retirement benefits.
“We received sufficient detail that we’ve been able to do some analysis,” Ms. Stausboll told the Sacramento-based fund’s board Wednesday. “We have serious concerns about actuarial soundness, vested rights issues and IRS issues that could impact the tax-qualified status of this fund.”
The state must pay $3.9 billion this fiscal year to CalPERS to finance retiree costs, up from $145 million a decade earlier. Mr. Schwarzenegger says the state can’t afford benefit increases approved in 1999 and wants them rolled back for new hires. He has supported proposals to require employees to work longer to qualify for pensions and to pay more toward benefits.