CalPERS November board meeting: How cities can make their voices heard

On Nov. 15, the California Public Employees' Retirement System (CalPERS) will begin a three-day board meeting where changes to the discount rate — the long-term interest rate used to fund future pension benefits — will be discussed and voted on. Further changes could have significant financial implications for cities. Local officials are encouraged to testify about how any change to the discount rate could impact their cities.

In July, CalPERS announced that their investment returns for fiscal year 2020-21 was 21.3%. This triggered the Funding Risk Mitigation Policy and an automatic reduction in the discount rate, from 7% to 6.8%. In September, CalPERS began its Asset Liability Management process, a recurring, integrated review of its assets and liabilities with the intent of informing decisions designed to achieve a sustainable fund.

CalPERS staff presented a range of potential investment portfolios to its the Board of Administration, with discount rates ranging from 6.2% to 7.0%. The Board narrowed that range down to 6.5%, 6.8%, and 7.0%, and asked staff to bring back various options for investment portfolios that can produce those expected returns. The Board will consider a number of factors, including the tolerance for market drawdown risk, acceptable volatility, and employers' ability to absorb different rate changes.

More information about the discount rate and Asset Liability Management process is available in a recent League of California Cities’ recent webinar, “CalPERS Update: How We Got Here and What’s Next.” The webinar helps stakeholders understand CalPERS' approach to these issues, what these decisions mean for members and employers, and what the Board of Administration may do during its November meeting.

Cal Cities position

The League of California Cities does not support a lowering of the discount rate. As the CalPERS Board of Administration considers which candidate portfolio would best suit the needs of the organization and its members, it is crucial that they understand the impacts that increased pension costs have on cities throughout California. City participation will help the Board understand the impact their vote could have on cities. 

How to participate

Cal Cities strongly encourages local officials to testify about how any change to the discount rate could impact their cities during the Board’s Investment Committee meeting. Although the Board meeting is taking place in-person, there are in-person and call-in-by-phone options available for cities and members of the public to provide public comment. There will be a special public comment opportunity at the start of the open session of the Investment Committee on Nov. 15. This opportunity to comment will commence immediately following rollcall, at approximately 9:15 a.m. There will also be the normal opportunity for public comment after the agenda item itself is complete, as well as at the close of the committee.  

Testimony is limited to three minutes.  

Cities and members of the public can provide testimony by calling (800) 259-4105. Those wishing to participate should call a few minutes early, enter the queue, and provide their name and organization. The board meeting can be viewed by visiting the CalPERS Board Webcast webpage.

If you are interested in sharing the impact that a further reduction of the discount rate or increased pension costs would have on your city with the CalPERS board, please provide public comment. Your city’s perspective is valued and essential. 

If you have any questions, please contact Deputy Executive Director Melanie Perron, Advocacy and Public Affairs.