A lot of publicity has gone to CalPERS and its pitiful 1% rate of return. CCCERA is using a 7.75 expected rate of return when for 2011 it earned 2.7%, the 5 year average is only 2.4%, and the 10 year average is 6.2%. Retaining that 7.75% rate of return will push more expenses to the governments in CCCERA including the county and ConFire. That will mean dollars that would go to services will be directed to pension payments.
Experts are saying this is an unrealistic rate of return but often political decisions get in the way of good finance choices. For example, CalPERS received a lot of pressure from cities and unions who did not want their rate of return reduced from 7.75% to 7.5% when their actuaries suggested an even lower number. This is because it would increase the cost of the payments to CalPERS. However, realistically, so does only earning the 1% that CalPERS just earned. However, that cost recognition is further in the future. It is expensive to kick the can down then road but that is the choice that is being made.