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9A Page 20 The workshops are scheduled as follows: . Central Valley, Wednesday. July 8 - California State University. Fresno . Southern California. July 22 - Anaheim Convention Center . Bay Area, Thursday, July 23 - San Jose State University Registration Details Registration is $20 and $30 for participants who also register for a boxed lunch. To register for the Fresno conference. please visit: httO://\NWW.acteva.com/bookina.cfm?bevaid=185157 Observations on PERS Rates and Impacts of Pension Obligations on Local Budgets Public agencies are expecting an increase in the cost of providing employees with CalPERS pension benefits because of the impact the challenging economy has had on the system. The June 15 issue of the PERS Public Agency Coalition's Alert included some observations on the situation that may be of interest to City Advocate Weekly readers. Instead of reprinting the entire piece, we are printing a selection of points that provide at least a partial answer to these pension questions that were made in the original article. What is rate smoothing and is it working? . .. .most pension plans utilize some sort of rate smoothing to mitigate swings in employer rates. PERS uses a 15-year smoothing policy, one of the longest in the industry... For purposes of calculating required employer contributions, investment gains and losses (Le., changes In market value) are spread over 15 years. So the June 30, 2009 valuation would, in theory, reflect one-fifteenth of the investment losses from FY 2008-09 plus one- fifteenth of the gains or losses from each of the previous 14 fiscal years. . PERS says that...its 15-year smoothing policy has worked exceptionally well. For the past four years, smoothing kept year-to-year changes in employer contribution rates within 1 percent of payroll. Any increases larger than that were due to benefit increases. . ...given a hypothetical loss [In PERS' investment portfolio] of 30 percent [this year] rate smoothing would cause a -2 percent [loss] to be allocated to each of the next fifteen years. [To counter this loss] PERS keeps warning employers that unless large investment returns are posted in future years, employer rates will continue to rise steadily over time because each future year would continue to recognize another -2 percent of the current year's losses. Self inflicted wounds? . A plan with rich benefits or earlier retirement ages will have a higher volatility index, so as a general rule. safety plans have higher volatility indexes than miscellaneous plans. And when benefits are improved, you not only increase your costs, but also your plan's volatility. Most public agency miscellaneous plans have volatility ratios between four and eight [on PERS' index] and most public agency safety plans have ratios between six and 10...Knowing this figure is key to determining how your own employer rates will be impacted when the current year's investment losses are factored into the rates. . PERS says that of the 2.000 plans it administers. all by 49 have ratios of ten or less. Those 49 plans are going to be shocked when they see their rates. So how does one get a high volatility index? Primarily from improving benefits, because more assets are needed per person employed. And this only seems relevant to retroactive benefit improvements. although almost all benefit improvements are applied retroactively. 6