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8A Page 2 'ea/PERS' ContInued from Page 1... This is great news for CalPERS and will significantly decrease the system's current unfunded liability that grew considerably during the downturn in the stock market earlier this decade. The system appears to be on to a "fully funded" or perhaps even 'super funded" status it enjoyed in the mid- to late-1990$. Despite the good news, however, employer members of CalPERS should note that these investment earnings will have a delayed impact on local employer contribution rates. Background on {Rate Smoothing' One of the key changes made by CalPERS because of the unprecedented two years of negative interest earnings of the system in the early 2000s was the institution of "rate smoothing.. The actuarial rate smoothing techniques implemented by CalPERS were designed to 'smooth" the volatility of employer contribution rates during times of dramatic loss or gain in the system. This actuarial discipline was demanded by most employers and employees after the sharp drop in interest eamings in the early 20oos. The good news for employers in the rate smoothing techniques is that the losses (contribution rate increases) will not be as dramatic as experienced in the early 2ooos. The bad news is that most employers will never see a rate holiday again where little, if any, employer contributions are paid into the retirement system. The "rate smoothing" techniques put into place by CalPERS are not set in concrete. CalPERS indicated that at the time these techniques were implemented, that if /when employer accounts reach the mark of 100 percent funding on market values. the CalPERS board of directors would be given options to consider for making changes in the smoothing techniques. It is likely that the state and many contracting employers will reach that funding mark as a result of the healthy investment earnings CalPERS just announced. Among the options for the board could be actions to ease employer contribution rates. The board deliberation on the actuarial smoothing policies may take two to three months before it is complete. One last issue to consider as a public agency contractor with CalPERS (all cities, counties, and special districts) is that the crediting of interest earnings to the retirement accounts of Public Agencies lags two years behind the timeframe for State of California as an employer. As a result, the 18 percent reported interest earnings will not impact the rates of Public Agencies until 2009-2010. That said, however, public agency contribution rates continue to be reduced as a result of solid. but less dramatic, CalPERS interest earnings over the past few years. As deliberations over possible changes to the CalPERS smoothing techniques take place, the League will issue further updates in Priority Focus. 'SB 1020' Continued from Page 1... SB 1020 is part of a much broader discussion about how California should (or should not) proceed beyond the existing 50 percent solid waste diversion mandate that is a part of the Integrated Waste Management Act of 1989 (AB 939 and SB 1322). Because the discussion is ongoing, the current language of SB 1020 is still considered a 'spot" for future language. The League of California Cities is in discussions with Sen. Padilla and other solid waste interest groups on the issue. The league currently has no position on SB 1020. Existing League policy does not address increasing the statewide diversion requirements above 50 percent. Based upon league policy committee review of similar past bills, however, the League has indicated that although it does not support or oppose and increase in the waste 2