Chicken Little Pension CalPERS Claims Aren't Coming Home to Roost

April 26, 2013

To: Interested Parties
From: Steve Maviglio, Pension Facts
Re: Chicken Little Pension CalPERS Claims Aren't Coming Home to Roost

For several years, Stanford professors paid by special interests and taxpayer "foundations" bankrolled by anti-union donors have attacked public pensions, pointing to their losses over the past few years. Never mind that their "solution" -- 401(k)'s -- performed even worse, losing trillions of dollars.

On Friday, the Sacramento Bee and Reuters reported the news that CalPERS investments hit a record high Friday, erasing every penny of the investment losses it suffered in the market crash last decade.

Says the Bee: “America's largest public pension fund has erased the nearly $97 billion worth of investment losses it suffered in the market crash. Its portfolio swelled to a record $261.7 billion Friday, surpassing the pre-crash high in 2007.

This financial milestone, coupled with measured moves by CalPERS to smooth its investments and boost the amount it has to pay future pensions, is putting CalPERS well on the road to a robust funding level.

Will this news silence the voices still claiming that public employee pensions are the root of California’s fiscal problems and that public workers haven’t made enough sacrifices at the state and local level to reduce pension costs?

Of course not. Critics aren’t satisfied with the latest out of CalPERS, again muddying the picture by pointing to the fund’s long-term “unfunded liability,” even though the Bee reports that “The funding shortfall isn't an immediate cash crisis. CalPERS has plenty of money to pay retirement claims now and for the foreseeable future.”

Fact is, California’s public retirement systems are better off than they were during Gov. Jerry Brown’s first term in office. CalPERS was about 55 percent funded In the early 1980s, the final years of Gov. Brown’s first term and following another severe recession.  As the economy rebounded, so did CalPERS funding status. By 2000, the system was 130 percent funded. CalSTRS was about 29 percent funded when Gov. Brown was first elected in 1975, and it increased to 57 percent in his last year in office.  As the economy rebounded, so did CalSTRS funding status. By 2000, the system was 110 percent funded. A pension plan's funded status or unfunded liability is a snapshot in time that can change significantly over the course of a few years, depending on the economy and financial markets.

And meanwhile, a recent study by the Center for Retirement Research at Boston College says that pension “reforms” made at the state and local level will restore the state’s public pension funds to pre-financial crisis levels. “Whether it has been at the bargaining table in more than 300 jurisdictions or at the state level, public employees have been part of the solution to ensure public pension systems are financially sound,” wrote the study’s authors.  Researchers also found “in most cases, reforms fully offset or more than offset the impact of the financial crisis.”

Read the Bee story here: