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i California's by employers. Second, reduce Debate Over Public the average future employer Pension Pans contribution. Third, ensure that the solutions would not impact conainued from page I our ability to pay benefits, initiatives with hopes that a legislative solution can be found instead. Flanked by government and local workers, Sch,%wzenegger said he wanted to work with the Legislature, policymakers, and local government in the coming year to help solve the pension issue, but said that he was still prepared to lead a ballot proposal, "...should we not be able to reach an agreement in this building, then they (legislators) should understand that our pension reform proposal will go to the ballot in June 2006." DS versus DC Defined Benefit ID0) Plan— In a DB plan, a retiree will receive a benefit, guaranteed by law, that is determined using a member's years of service, age at retirement and highest one-year or three-year compensation while employed. Defined Contribution (DC} Plan— In a DC plan, benefits are determined by the amount of contributions to an account, plus earnings, Members and employers make contributions to the account, and members make investment choices, similar to a 401(k) plan. CalPERS Takes Action CalPERS officials recognized the plight of employers in meeting their financial obligations to fluid pensions and set on a path to provide some relief. Last year, CalPERS staff and Board launched a number of initiatives to address rising employer pension costs, including workshops with employers and a survey that sought input on how to address employer rate fluctuation. CalPERS had three goals. First, minimize the volatility in the contributions paid Ar' ., ) Panel-'^ Can++ritri Ale+.. I G �..,.•.,R,. onnC An additional goal was to find a solution that complied with the generally accepted accounting standards set forth'by the Governmental Accounting Standards Board. Ca1PERS staff presented a plan to "smooth" contribution rates made by employers from year to year—whether investment returns go up or down. The idea is to eliminate the volatility in employers conrributions that are created by fluctuations of CalPERS investment earnings. For example, when investment returns rise in a booming market, employer contributions fall—sometimes to zero, as they did for school employees for four straight years. When CalPERS investments dip during market downturns, employer contributions must go up to keep the pension system solvent. The plan was adopted by the CalPERS Board of Administration, and complies with accepted accounting standards without undermining CaIPERS ability to pay pension benefits as promised. The plan is also consistent with one of the goals of the Governor and his Administration —to allow the State to eliminate the volatility in what the State and other public employers pay from year to year_ At a State hearing on this issue the Governor's Finance Director, Tom Campbell, said he welcomes any restructuring of pension contributions that won't burden taxpayers who pay the bills. "If there is a chance of structuring something that would be responsive to those concerns while preserving that one fundamental—that the taxpayers not have to be on the hook in case of a market decline—I'm really very, very eager to do so," said Campbell.