Navigating CalPERS 2023 Valuations: A Practical Guide for Government Finance, Budget, and HR Teams

Every year, California’s public agencies receive their updated CalPERS actuarial valuation reports—documents that are packed with numbers, forecasts, and funding projections that shape the financial decisions of cities, counties, and special districts. These reports are essential, but they can be difficult to interpret, especially for those outside of actuarial roles.

As pension costs continue to rise and as governments work to balance budgets while maintaining services and workforce stability, understanding CalPERS valuations isn’t just a finance team task—it’s critical knowledge for HR, budget, and leadership teams as well. With the 2023 valuations in hand, this guide helps government agencies make sense of the data, translate it into action, and communicate it clearly across departments and with stakeholders.

Why CalPERS Valuation Reports Matter More Than Ever

Pension costs are among the most significant financial obligations facing California public agencies. These costs are long-term, complex, and politically sensitive. Every decision about staffing, compensation, and retirement has ripple effects that impact budgets for decades.

CalPERS valuations provide a window into these obligations. They reveal your agency’s current funding status, projected future costs, and the factors driving increases or decreases in required contributions. The insights buried in these reports are key to:

• Forecasting pension contributions over the next 5–20 years
• Informing negotiations with labor groups
• Guiding hiring and compensation strategies
• Ensuring compliance with fiscal policy and reporting standards

For these reasons, it’s no longer enough to leave pension analysis solely to finance directors. Budget officers, HR professionals, city managers, and department heads all need a shared understanding of what the numbers mean.

What’s in the 2023 CalPERS Valuations

Each CalPERS valuation is prepared for a specific plan—Miscellaneous, Safety, or other tiers. The 2023 reports reflect your agency’s position as of June 30, 2022. Key elements include:

• Funded Status: The ratio of assets to liabilities. A 100% funded plan has exactly enough assets to cover its expected future obligations.
• Unfunded Accrued Liability (UAL): The shortfall between what the plan has and what it needs. This is the debt your agency must pay down.
• Normal Cost: The cost of pension benefits earned by employees in the current year.
• Required Contributions: Divided into the normal cost and the UAL amortization payment. These are the numbers your finance team must budget for.

The 2023 valuations also include projections for contributions over time, broken out by payroll growth assumptions, investment returns, demographic changes, and other variables. This forward-looking data helps agencies anticipate how their obligations might change.

How Investment Returns Shaped the 2023 Reports

One of the biggest drivers of changes in pension costs is the CalPERS investment return. In the year ending June 30, 2022, CalPERS reported a -6.1% return—a rare negative year after a +21.3% gain in the prior cycle.

This volatility impacts contribution rates. Poor returns increase UAL and future required payments, while strong returns reduce the gap. The 2023 valuation reflects the impact of the -6.1% return, which means agencies are now absorbing higher pension costs than they had previously forecasted.

Because CalPERS uses a five-year smoothing methodology, the effects are phased in. That means costs will continue to increase for several years, even if future returns are more stable. Agencies must prepare now for those rising contributions.

Understanding Your UAL Schedule

Every agency’s valuation includes a detailed UAL amortization schedule. This is essentially a debt repayment plan showing how much you owe each year, how much interest is accruing, and how long it will take to pay off each base.

The schedule is made up of multiple layers, or “bases,” each representing a different event (such as investment losses, assumption changes, or benefit enhancements). Some of these bases stretch over 20 or 30 years, which extends the timeline of debt payments far into the future.

For budget and finance teams, understanding these schedules is critical. It helps you:

• Forecast long-term obligations more accurately
• Identify high-interest bases that may be candidates for early payoff
• Communicate clearly about what’s driving pension increases

This knowledge also empowers agencies to consider alternative payment strategies, like discretionary payments or short-term financing, to reduce interest costs.

Comparing Safety vs. Miscellaneous Plans

Most agencies have at least two plans: Miscellaneous (for non-safety employees) and Safety (for police, fire, or other public safety personnel). The funding status and costs for these plans can vary widely.

Safety plans tend to be more expensive for two reasons:

1. Benefit formulas are richer (e.g., 3%@50 vs. 2%@62)
2. Retirement ages are lower, which shortens the funding window

In 2023 valuations, many Safety plans showed larger UAL growth and steeper cost increases than Miscellaneous plans. It’s essential to look at each plan separately and not assume that overall contribution rates reflect the whole picture.

How New Hires Affect Valuations

Since PEPRA went into effect in 2013, new employees in the CalPERS system have been enrolled in lower-cost pension formulas. These new “PEPRA” members reduce overall pension costs over time, but the effect is gradual.

The 2023 reports reflect a growing share of PEPRA members in many agencies. However, because most UAL is tied to benefits earned by classic members, the short-term impact on funding status and required contributions remains modest.

That said, understanding your workforce composition—how many members are PEPRA vs. classic, and how quickly that ratio is shifting—can inform hiring strategies, labor negotiations, and long-term projections.

Making the Reports Actionable Across Departments

One of the biggest challenges in public agency pension management is making the valuation data accessible and actionable across departments. Too often, the finance team reviews the reports in detail while HR, budget, and leadership rely on high-level summaries.

Instead, agencies should adopt a shared analysis approach. This might include:

• Creating simplified dashboards or summaries showing contribution trends
• Hosting joint sessions with HR, finance, and department heads to walk through key takeaways
• Using valuation data during labor negotiations to ground proposals in fiscal realities
• Identifying classifications or departments where pension costs are rising fastest

By building cross-departmental fluency in pension data, agencies can make more strategic staffing, budgeting, and compensation decisions.

Discretionary Payments and Cost-Saving Opportunities

With costs rising, many agencies are looking for ways to reduce long-term pension expenses. One powerful tool is discretionary payments—making extra payments toward UAL bases beyond the required contribution.

The 2023 valuations provide information on the interest rates tied to each base. Some older bases carry interest rates above 7%, which is higher than what most agencies earn on their general fund investments. Paying these off early can generate significant savings.

Agencies can evaluate:

• Whether to use reserves or surplus funds for additional payments
• Which bases offer the highest return on early payoff
• Whether to use short-term financing tools to front-load payments

These strategies are not one-size-fits-all, but with the right analysis, they can turn rising pension costs into an opportunity for long-term savings.

What to Watch for in Future Valuations

Looking ahead, several factors will shape future CalPERS valuations:

• Investment returns: Continued volatility or underperformance will drive UAL higher
• Demographic trends: Changes in life expectancy, retirement patterns, or hiring can shift assumptions
• Assumption changes: CalPERS periodically revises assumptions on payroll growth, discount rates, and mortality, which can alter costs significantly

Staying informed about these changes helps agencies plan proactively. It also reinforces the need for annual review and cross-departmental engagement with the reports.

Strengthening Workforce Planning with Pension Insights

Ultimately, pension valuations aren’t just finance documents—they’re workforce planning tools. Understanding how staffing levels, turnover, and compensation changes affect pension obligations allows HR and finance teams to work more collaboratively.

For example:

• Planning for upcoming retirements can help manage pension spikes
• Evaluating compensation proposals with pension impacts in mind leads to better negotiations
• Anticipating how changes in headcount affect normal cost and UAL supports smarter budgeting

By integrating pension analysis into workforce strategy, agencies can improve long-term sustainability and service delivery.

Final Thoughts: Building Pension Literacy in Public Agencies

The 2023 CalPERS valuations are a wake-up call for many agencies. Rising costs, volatile returns, and complex amortization schedules require a more engaged, informed, and collaborative approach.

Finance, budget, and HR professionals must build a shared language around pension data. By demystifying the valuation reports, aligning on strategy, and seeking opportunities for savings, public agencies can navigate these challenges with more confidence and control.

Understanding your CalPERS valuation isn’t just about numbers—it’s about your agency’s ability to serve the public, support employees, and build a resilient financial future. With the right tools and insights, that goal is within reach.