SACRAMENTO — The multibillion-dollar portfolios of California retirement systems that cover thousands of current and retired state and local employees suffered staggering losses in the unprecedented market plunge, officials said Monday.
Anticipating a flood of calls from worried retirees, pension system managers stressed that the losses will not prevent the payment of benefit checks.
The Public Employee Retirement System (PERS), which pays benefits to about 220,000 retirees and half a million active government employees, disclosed Monday that its $20-billion portfolio lost 25% of its value in the last week.
The system--one of the largest in the nation--invests retirement funds for employees of state government, most counties, special districts and non-teaching school employees. An estimated 44% of its portfolio was invested in the market, a spokesman said.
Losses could be even greater for the State Teachers Retirement System (STIRS), which has invested about 60% of its assets in stocks.
Michael Carter, deputy executive officer of the teachers fund, acknowledged that losses to the system's $25-billion portfolio are "significant." But Carter said the fund's investment manager would not provide any specific figures "at this point in time."
Carter expects the bad news from Wall Street to fan concern among retirees.
"In the recent past all the calls we would receive were relative to congratulating us on a fine performance," Carter said. "I don't know what kinds of calls we are going to get now."
Basil Schwan, PERS' assistant executive officer, said worried retirees and employees have already been calling his office.
"These people are very concerned, very worried," Schwan said. "They are out buying their groceries and paying rent and they have a difficult time relating to what has happened here and what they see on network news."
Schwan said he could "assure the retirees" that their benefits and the system as a whole "are in no way threatened by this market move. We can say that for the future also. . . . By the same token, we don't want to understate the importance of the move. The loss is severe."
In some cases, these fund managers noted, the losses thus far were largely "on paper," that is, the stocks held by the funds are worth less today than in previous weeks but in some cases are still ahead of their original purchase prices.
Patricia Small, associate treasurer for the University of California, said that is largely the case for the university's $10-billion investment pool--75% of which was invested in stocks.
Meanwhile, Los Angeles City officials scheduled an emergency review of the city's pension fund to discuss the impact the plunging stocks have had on the city retirement systems.
Among the city's three retirement funds, the largest one--the City Employees' Retirement System--has sustained "paper losses" of about $275 million out of its $2-billion total, said Councilman Zev Yaroslavsky, chairman of the Finance and Revenue Committee.
"The level of concern here is intense," Yaroslavsky said. "We feel the city pension funds have taken a real hit over the last few days."
He said other retirement programs, which cover police, firefighters, paramedics and Department of Water and Power employees, also have a substantial portion of their portfolios in stocks.
Until 1984, cities, counties and state retirement systems in California were barred from investing their money in the stock market. However, that changed when voters approved a state constitutional amendment allowing those funds great flexibility in how they invest.
The ballot measure, Proposition 21, was requested by top officials of PERS and STIRS, the two huge state retirement systems, who argued at the time that they needed more flexibility to keep earnings ahead of inflation and to reduce taxpayer contributions to the fund.
The measure did not apply to state, county and city treasuries, which are still barred from stock market investments. And officials representing those entities said they were never so grateful for being forgotten.
"On days like these, I'm thankful we do not and are not allowed to invest in equities," said George Jeffries, Los Angeles County's chief investment officer.
Jeffries said the city's $3.75-billion treasury is invested mainly in short-term government securities and bonds. Those investments yielded the county less than 7% last year. But Jeffries predicted that cities and counties would do better than other investors this year because of the volatility of the stock market.
Los Angeles City Treasurer Leonard Rittenberg likewise said the effect of Monday's plunging stock market on the city treasury "is nothing."
"The fact of the matter is, from the city's point of view, we will probably benefit," Rittenberg said.
Contributing to this story were Times staff writers Victor Merina in Los Angeles and Steve Emmons in Orange County.