A year ago last month, Sonoma County issued $289 million in additional pension obligation bonds as a way to manage runaway retirement costs. Bonds can be a helpful tool. But they come at a risk. (It’s a little like addressing one’s personal debt by getting a new credit card. You better hope your earnings on the new money you borrow do better than the interest you owe.)
For the Sonoma County Employee Retirement Association, it needs to hit its target of achieving an average 7.75 percent annual return on its investments – over the next 20 years.
So how did the county do during its first full calendar year? It wasn’t even close.
According to records recently released by SCERA, the association achieved a return for 2011 of 1 percent, missing its mark by 6.75 percent.
But SCERA is not alone. The California Public Employees Retirement System, the largest public employee retirement system in the state, reported on Monday that it, too, earned a return of just 1.1 percent on its investments in 2011. CalPERS also is targeting a 7.75 percent average annual return on its investments.
CalSTRS, the retirement system for state teachers and community college instructors, reported today it had earned 2.3 percent on its investments in 2011.
If these retirement funds do not achieve their targets, the state’s current pension fund liability of $240 billion will get that much worse.
The same is true of Sonoma County’s liability, which currently stands at $249 million. SCERA’s overall average return over the past 10 years? 4.9 percent.
- Paul Gullixson