The California Public Employees’ Retirement System reported an annual return on investment of 6.7 percent on Thursday – lower than its goal of 7 percent, but still a decent return rate. Meanwhile, California cities have seen a booming real-estate market, with property tax windfalls soaring by more than 6 percent in many areas. California’s budget is in surplus territory, with the governor earmarking billions of dollars to pay down state debts. By any measure, this is good news, yet California cities and counties are struggling to make ends meet. They are facing something known as service “crowd out,” whereby their expenses are consuming so much of their budgets that there’s a dwindling amount left to pay for fundamental services. Many California public-school districts are likewise concerned about their financial straits.