This tiny Sierra Valley town voted to pull out of CalPERS. Now city retirees are seeing their pensions slashed

The L.A. Times reports:

The tremor in John Cussins’ right hand worsened as he described restless nights haunted by worries about paying the bills.

After suffering a stroke in 2012, he retired as a 21-year employee of the city of Loyalton, Calif., where he oversaw the town’s water and sewer systems. Cussins, 56, believed his city pension and the Social Security payments he and his wife received would bring in enough to provide a decent retirement in the tiny, old timber mill town in the Sierra Valley.

Then a letter arrived in October. The California Public Employees’ Retirement System was cutting his $2,500-a-month pension by 60 percent, bringing it to about $1,000 a month.

“I was really shocked when I found out about it,” Cussins said. “We thought the pensions were there for the rest of our lives.”

Loyalton’s four retired city employees became the first in California to see their pensions sliced by CalPERS because of a city defaulting on its payments to the fund, but hundreds of other government retirees across the state may soon face a similar fate. At the same time, financially strapped local governments that considered pulling out of the state pension system, some hoping to find more affordable alternatives, have found it next to impossible to do because of the large termination fees they must pay CalPERS if they do.

As the nation’s largest public pension fund, CalPERS manages a $300-billion retirement system that services more than 1.8 million members and a retiree healthcare program that serves close to 1.4 million more. CalPERS functions as a money manager, investing the funds paid into the system by state and local governments. But those governments decide what pension benefits they will provide their employees and are ultimately responsible for ensuring there is enough money in their pension funds to provide the benefits promised.

The struggles of the Welfare State.