The largest public pension fund in the U.S. lost almost $67 billion in 12 months, more than 25 percent of its value, as stock markets tumbled.
The market value of the California Public Employees' Retirement System declined to $193.7 billion as of Oct. 9, from $260.6 billion a year earlier. Between Sept. 15, when Lehman Brothers Holdings Inc. filed for bankruptcy, and last week, the fund's stock holdings declined by $12.4 billion to $36.8 billion, according to data compiled by Bloomberg.
Pensions and retirement accounts, which tend to be heavily invested in stocks, may have lost as much as $2 trillion since 2007, the Congressional Budget Office reported Oct. 7. In the 12 months through Friday, the Dow Jones Industrial Average dropped 40 percent, the Standard & Poor's 500 Index, 42 percent.
Calpers reported that it lost 2.6 percent for the fiscal year ended June 30, its worst performance in six years. Retirement benefits promised to retired state workers in California are guaranteed and won't change when stock markets decline...MORE
Retiree benefits are guaranteed by the state, which makes this proposal, reported by the Sacramento Bee all the more interesting:
Cash-strapped California looks to its pension funds
With California's wallet emptying out faster than the cash is trickling in, state officials scrambling to pay the bills have set their sights on new lending sources: California's two biggest public pension funds.
Sen. Dean Florez, D-Shafter, has proposed that the California Public Employees' Retirement System purchase the state's looming debt. The money would keep California operating – including paying state employee payroll and funding schools – into next year.
Florez outlined the plan in a letter to state Treasurer Bill Lockyer on Friday. Lockyer spokesman Tom Dresslar on Monday said his boss will also float the idea to the California State Teachers' Retirement System. Lockyer sits on the boards of both funds.
"I just thought, 'Nobody is talking about CalPERS as a possible investor,' " Florez said Monday. "They might be able to get us a better deal than the banks, and we might be able to give them a better return on their investment than the stock market, especially right now."
Florez and Dresslar said that if the funds wouldn't purchase state notes, Lockyer could ask them to issue letters of credit to shore up investor confidence....MORE