The nation’s largest public pension fund portfolio, CalPERS, has lost 31.1% of its value since peaking last fall, a staggering $81.4 billion drop.
CalPERS officials say a “rainy day fund” is helping to defray the losses – for now. But if the market slump continues, they will hit up state and local employers for more money. That’s a painful prospect as California struggles through a fiscal emergency and municipalities cope with the foreclosure crisis and economic downturn.
The good news for the 1.6 million CalPERS retirees, workers and family members is that their pension benefits are guaranteed.
The CalPERS portfolio hit a high point of $260.6 billion on Oct. 31, 2007. As of market close on Dec. 4, it had fallen to $179.2 billion – almost back to its value in mid-2000.
Unlike many pension funds, CalPERS can require employers to dig deeper when needed. Since those employers are public entities, their funds come from taxpayer dollars. This fall, CalPERS warned that it might ask for more money from the state starting in July 2010 and from local-government employers starting in July 2011.
The nation’s second-largest public pension fund is the California State Teachers’ Retirement System with 794,812 members. It, too, is in the red with heavy losses. Its portfolio fell more than 20%, or $32.9 billion from June 30 to Oct. 31, going from $162.2 billion to $129.3 billion.
Pension funds have suffered due to a continuous wave of global stock market declines, allied to ongoing weakness in U.S. shares where trillions of dollars of shareholder value have been wiped out.