Drop in Value of CalPERS Holdings Triggers Hike in Benefits Contribution
CalPERS' recent announcement that its portfolio fell by 23.4% last year demonstrates California's ongoing challenges in funding health care and retirement benefits for its 1.5 million public workers and retirees, Bloomberg/Contra Costa Times reports.
The California State Teachers' Retirement System, or CalSTRS, also announced that its investments dropped by 25% last year (Bloomberg/Contra Costa Times, 7/21).
The value of CalPERS' holdings dropped from $239.2 billion in June 2008 to $180.9 billion at the end of last month, partly as a result of the economic downturn.
In response, the pension fund modified its investment choices and risk management policies, officials said (Lifsher, Los Angeles Times, 7/22).
CalPERS would have to earn an average of 7.75% per year to ensure that it has sufficient funds to pay benefits (Bloomberg/Contra Costa Times, 7/21).
The pension fund said it will request higher contributions from the state beginning in July 2010 and from local governments a year later. CalPERS will announce the requested amounts sometime this fall (Kasler, Sacramento Bee, 7/22).
Impetus for Reform?
Gov. Arnold Schwarzenegger (R) is expected to emphasize the fund's recent losses as he renews efforts to modify the state's pension system.The governor has said California could reduce spending by providing smaller pensions to new state workers and modifying the "unsustainable retiree pension formulas" (Los Angeles Times, 7/22). This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.