CalPERS proposes $2.74 billion FY2025–26 budget, cites investment fees and tech initiative as drivers

CalPERS staff presented a proposed fiscal year 2025–26 budget of $2.74 billion to the Finance and Administration Committee on April 8, asking the committee to approve a range of operating and investment‑related budget items.

Will Schofzma of the CalPERS financial office said the proposal represents an 8.4% increase over the current year budget and reflects multiple factors: higher projected external management fees driven by increased active management and larger allocations to private asset classes; full‑year fees for newly contracted population health and PPO administrators; costs for the investment data and technology modernization initiative; and facilities projects including LED lighting and emergency power upgrades at CalPERS’ Lincoln Plaza headquarters.

Schofzma noted projected savings in the current year — roughly $75.1 million as of December 31, 2024 — largely from salary savings due to vacant positions and lower‑than‑expected consultant costs. The proposed budget holds position authority flat and redirects $1.7 million in current‑year projected savings into specific items, including student assistance programs, call‑center automation, website threat detection, parallel valuation and certification services, and multi‑factor authentication for employer access to myCalPERS.

The budget includes $637.4 million for administrative operating costs, $186.4 million for investment operating costs (driven principally by the $28 million modernization initiative incremental cost over the FY2024–25 baseline), and $1.57 billion estimated in external investment management fees tied to AUM movements. Schofzma said external fees correlate with AUM performance and deployment. The committee approved the proposed budget by voice vote and staff will continue to refine details ahead of final board action.