The state pension fund has been assuming a 7.75 percent annual return since 2003, but new projections for the next 10 years put the number at anywhere from 7.03 percent to 7.7 percent. The potential difference may seem small, but keep in mind this is a $205 billion fund and any shortfall could amount to many millions of dollars - money that will have to be found somewhere. From the Sacramento Bee:
As it is, CalPERS already is expected to impose a $600 million rate increase on the state to help make up for the huge investment losses it incurred in 2008. The pension fund's board is expected to finalize that decision Wednesday. The increase would bring the state's annual contribution to $3.9 billion for the fiscal year that starts July 1.
The City of L.A. remains noticeably generous in its projections for investment returns, one of the concerns that former Mayor Richard Riordan has been talking about.