California's huge government pension fund is expected to report today a whopping annual loss of an estimated $56.8 billion, almost a quarter of its investment portfolio.
The loss at the California Public Employees' Retirement System for the fiscal year ended June 30 is the second in a row for the country's largest fund. A year ago, CalPERS reported an $8.5-billion loss, as the severe recession began to take hold.
The tremendous drop in value is expected to have a direct effect on the amount of money that the state and about 2,000 local governments and school districts must contribute in coming years to pay for pensions and healthcare for 1.6 million government workers, retirees and their families.
As income from the pension investments fall, the governments would have to make up the difference to meet the state's pension and healthcare obligations.
In the fiscal year that ended a year earlier, CalPERS' holdings in stocks, private equity, real estate and commodities positions were worth $239.2 billion. They fell to $182.4 billion on June 30, down 23.7%, according to daily postings on the fund's Internet site.
CalPERS hit a record-high balance of $247.7 billion on June 30, 2007, and it earned double-digit returns for the five fiscal years from 2002-03 to 2006-07.
Without those kinds of flush years, CalPERS could have a difficult time getting the average annual return of 7.75% that its actuaries say it needs to meet obligations to retirees without drastically raising employer contributions.
To ease the damage on already cash-strapped cities and counties, CalPERS' board has approved a plan that would spread the last fiscal year's deep losses over the next 30 years, beginning in mid-2011.
Also today, the country's second-largest public pension fund, the California State Teachers' Retirement System, will release its results for the 2008-09 fiscal year.