California Pension Funds Mostly Erase 2008 Losses

  • January 21, 2011
  • By John Gramlich
Headlines about state pension funds are rarely positive these days. The New York Times , for example, reports that some members of Congress believe it is " just a matter of time " before a fiscally stressed state becomes so buried in debt — including its unfunded obligations to public retirees — that it asks for an emergency bailout from the federal government. Members of Congress are debating whether states should be given the option of declaring bankruptcy.

California, of course, has fiscal problems that are among the worst of any state. But a glimmer of good news on the retirement front emerged this week when the state's two largest pension funds reported investment returns of more than 12 percent last year — an unusually strong performance that mostly erased the losses incurred during the stock market collapse of 2008, The Sacramento Bee reports .

The California Public Employees' Retirement System (CalPERS) said it earned nearly 12.5 percent in 2010. The California State Teachers' Retirement System (CalSTRS) earned 12.7 percent.

"This is very encouraging news," the chief executive of the teachers' retirement fund said, though he cautioned that more taxpayer money still will be necessary to make the fund solvent. "The historic market declines of the 2008-09 financial crisis showed us that CalSTRS cannot solely invest its way to healthy long-term funding."

Other states' pension funds also are reporting significantly improved returns as a result of the stock market rebound in 2010.

Like its counterpart in California, Oregon's pension fund for public workers gained more than 12 percent in 2010, The Oregonian reported . Iowa's largest fund for public workers has returned to pre-2008 levels after assets rose to $22.3 billion from $19.5 billion since June 30, according to The Des Moines Register .

Meanwhile, the Center on Budget and Policy Priorities, a Washington, D.C., think tank, issued a report Thursday (January 21) arguing that funding shortfalls for worker pensions and health care
while seriousshould not be conflated with short-term budget problems caused by the ailing economy. States have "several decades" to address their pension and retiree health care obligations, CBPP said.