According to Gwilyn McGrew at Big Government:
As you can hear Mr. Hwang say in his presentation to the Huntington Park City Council last week, “that means we will defer most of the loss to future years.” “This means the city will realize another increase in future years. I hate to bring bad news, but those are the facts.” Well, the fact is this bad news will hit budgets for all cities, counties and the state of California and not just Huntington Park. By playing with its financial model in this way, CalPERS is treating all California taxpayers like Madoff investors by cooking its actuarial books to Hide The Decline in its assets.
…the actuary reports at the beginning of the video that the key “rate of return” assumption is likely to change to a lower level that will then require cities, counties, and the state (read that as “taxpayers”) to significantly increase payments to CalPERS in 2012 and thereafter.
In other words, the burden on local governments and the state is about to balloon. If CalPERS were to lower the rate of return assumption to Bill Gross’ widely discussed “new normal” rate of return of 4%, that would mean a city or county would have to pay over 20-30% MORE in contributions; a sum sure to sink many cities and maybe a few counties. If the return assumption gets lowered a tiny amount and the actual returns over time are close to the “new normal” then CalPERS will just dig an even larger hole that will need to be filled down the road by taxpayers.