2004/05 Support Budget

DOF Annual Requests

Price Increase

CSU uses price factors contained in annual budget letters issued by the Department of Finance to calculate the mandatory cost increase for inflation (growth in the costs of non-salary operating expenses and equipment). This calculation yields a cost requirement that has typically exceeded the amount CSU has been able to include in its budget plan due to the competing needs for limited revenue growth. The price increase calculation for 2004/05 totals approximately $18.8 million. However, funding for these costs contained in the following chart has not been proposed in the budget plan.

Price Increase

2003/04 Employer-Paid Retirement Adjustment

The California Public Employees’ Retirement System (CalPERS) defined benefit pension plan is funded by employee contributions, employer-paid contributions, and the plan’s investment earnings. The employee contribution rate has remained constant since July 1, 1976. Government Code Section 20677 (b)(1) provides that employee retirement contribution rates for State miscellaneous tier 1* members employed by the CSU that are in the federal system (Social Security) shall be 5 percent of compensation in excess of $513 per month. On the other hand, the employer-paid contribution rate fluctuates each year in order to meet defined pension benefit obligations. Over the past several years, employer-paid contribution rates have fluctuated considerably due to changes in the CalPERS plan’s investment returns and changes in retirement benefits. Retirement benefits were enhanced for employees in the State miscellaneous tier 1 category (to 2 percent at 55) in 2000 and for employees in the Peace Officer/ Firefighter category (to 3 percent at 50) in 2001. The previous table provides CalPERS employer-paid retirement contribution rates from 1997/98 through 2003/03.

CALPERS

California Government Code Section 20814 requires the State to include in the annual budget the employer rates established by the actuary, and requires the Legislature to adopt the rates and authorize the appropriation in the Budget Act. Due to the increase in employerpaid retirement rates from 2002/03 to 2003/04, CSU will incur an additional $155 million in General Fund retirement fund costs. The State Department of Finance processes State agency retirement adjustments during the fiscal year. In 2003/04, CSU will receive a supplemental budget appropriation to cover the increase in retirement costs.

For additional information, reference the CalPERS Retirement Program pageon the CSU Human Resources web site.


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Last Updated: December 8, 2003