Tuesday, July 21, 2009

Daily California Watch 10

That didn't take long.

The budget deal is dead. No, not from a vote, not from the secret revenue projections leaking. not from the municipalities revolting. not from the bond markets closing. No, this from CalPERS who today released 2009 performance. 23% declines in assets. Correction; 23% declines in acknowledged loses to assets. What that means is that according to "the rules" the State and municipalities need to make them whole again. Ain't gonna happen.

The California Public Employees' Retirement System reported a decline of 23.4% for its latest fiscal year ending in June, marking its worst year ever.

The pension fund saw its value fall by $56 billion from the previous fiscal year to $180.9 billion.

"The result is not a surprise," Joe Dear, Calpers chief investment officer, said in a prepared statement. "The System has more than enough cash through contributions and income from investments to meet our present liabilities."

Still, Calpers has signaled to its members that they should expect higher contribution rates in the future to make up for market losses.

Some of Calpers's worst-performing assets were private or "alternative" investments, which have attracted the interest of many public pensions and endowments in recent years. Real estate was hardest hit, falling an estimated 35.8%, and private equity was next in line with a 31.4% decline. Figures for both of these categories reflected the 12-month period ending in March.

Cash, up 1.4%, and the fund's global fixed-income, which earned 0.6%, were the only reported assets to finish higher.

The value of the fund dipped as low as $160 billion in March before rebounding by about $20 billion in the final three months of the fiscal year, according to Calpers.

Separately, the California State Teachers' Retirement System, the second-largest public fund, reported a preliminary decline of 25% for the fiscal year ending June 30, 2009, with its market value of assets falling to $118.8 billion.
Suck it up teat latchers.


wagga said...

Sounds like taxpayers get hind teat, not first teat.

sm_landlord said...

If I am not mistaken, that picture is the rock that fell in Topanga Canyon a few years back. An employee emailed me that photo to explain an absence from work.

On topic for a sec, what does this indicate about the prospects and ratings of local bond issues? Do the bonds payments get made before the make-up payments to the retirement funds?

D J Capelis said...

@sm_landlord: Bond payments come before anything else but payments to education per the state constitution.

Mr. Outspoken said...

Holy crap! Now that you mention it my 401k balance is down from last year! Where is the form for me to fill out to be compensated by the state?

sm_landlord said...

Dear Mr. Outspoken,

All will be well as soon as we get around to nationalizing your 401K. You will benefit greatly from your new investment in 100% Treasuries, which as we all know are 100% safe and 100% good for you.

Best Regards,
Timothy Geitner

Unknown said...

Calpers needs to go after Lennar Homes who stole almost 1B from the fund in a land deal.

Anonymous said...


W.C. Varones said...


CalPERS was just plain stupid. They bought ass-end-of-nowhere land at the peak of the real estate bubble.

Lennar is guilty of nothing other than selling to idiots, as far as I can tell.

Lou Minatti said...

Contracts, agreements and promises be damned. The only way out of this, in CA and elsewhere, is to eliminate early retirement and reduce current pensions. I'd limit pensions for all government workers to no more than $50k.

Have ya'll seen this? Two NYC employees (NYPD and Transit) throw their daughter a $50,000 Sweet 16 party.


Tell me again that the public sector is underpaid.

Peripheral Visionary said...

Public sector salaries and retirements have steadily risen over the last twenty years, primarily because the economy was doing well and local governments were flush with money, and nobody cared. The outsized compensation, particularly for senior government bureaucrats, as well as some specialized positions like firemen and police (teachers don't make anywhere near what they do) is now being exposed, and is due for a correction.

I suppose it wouldn't bother me as much if there was any merit to it; but the simple fact is that higher paid government employees don't really do much more for the community than lower paid government employees, they've just been around longer and are better at playing the bureaucratic game that results in promotions. Is a transit coordinator with a desk job really that much more valuable to society than a bus driver? The general public is shocked at the high salaries of some government employees, but the reality is that a lot of government positions still have low pay--and it's the people in those positions who are doing the real work.

Jean ValJean said...

Excuse me?

The rest of the nation, which has historically looked to California as a model for fierce economic independence and freewheeling innovation, may now see that the state looks like every place else — just with better beaches.

Now maybe I'm missing something.. but I didn't know everyone looked at California a model. Maybe of what NOT to do....