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Market decline pulls down value of CalPERS fund

The public pension fund's holdings have shrunk 20% since July 1. Contributors could see a rate hike.

October 23, 2008|Marc Lifsher | Lifsher is a Times staff writer.

SACRAMENTO — Volatile stock and commodities markets have slashed the portfolio value at the nation's largest public pension fund by about 20% since July 1, the California Public Employees' Retirement System reported Wednesday.

The loss, if not recovered by the end of the fiscal year ending June 30, could lead to increased contributions of up to 4% from state and local government and school district employers, beginning mid-2010, CalPERS workers told board members at a meeting in San Luis Obispo.

CalPERS' assets totaled $192.7 billion at the close of business Monday. They were at $239.1 billion July 1.

Thanks to an adjustment process created to deal with extreme market fluctuations after 9/11, big swings in CalPERS' earnings and losses are now spread out over 15 years.

"No large change in investment performance in one year will directly translate into the same level of change in employer rates in a single year," CalPERS board member Kurato Shimada said.

The fund's losses have also been mitigated by four years of double-digit returns leading up to the 2007-08 fiscal year that ended June 30, said Ron Seeling, the fund's chief actuary.

CalPERS is not the only giant state pension fund suffering big losses in recent weeks. The portfolio of the California State Teachers' Retirement System, the country's second-largest fund with 795,000 members, dropped 9.4% to $147 billion on Sept. 30 from $162.2 billion on June 30.

And in San Francisco, Rep. George Miller (D-Martinez) said the government agency that guarantees pension plans for millions of Americans -- the Pension Benefit Guaranty Corp. -- lost at least $3 billion in the last year and had investments in mortgage-backed securities.

"This dramatic loss represents a swing of more than $6 billion from the previous year," Miller said during a hearing in California. "It's likely that the agency's losses will be substantially worse once numbers from September are reported."

Gary Pastorius, a spokesman for the agency, said the trust fund's portfolio was down 1.2% this year through Aug. 31. That compared with a 13% decrease in the Standard & Poor's 500 index over the same period.

Pastorius said the agency's 2008 deficit was expected to be $10 billion to $12 billion, "significantly lower" than the $14-billion shortfall in 2007.

The government-backed company guarantees the pensions of 44 million workers and retirees and is funded by premiums paid by private and state pension plans. An increasing number of defaults during the last decade have left the agency with $82 billion in liabilities and a $14-billion deficit, the Government Accountability Office said in an August report.

Bloomberg News was used in compiling this report.


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