The Sacramento Bee broke the story on Monday, but a simple search of CalPERS press releases also tells the tale.
CalPERS has a generic tag line it uses at the end of some of its press releases that mention the total size of the fund. Here's what it said in January 2008:
CalPERS is the nation’s largest public pension fund with assets totaling more than $240 billion. The System provides retirement and health benefits to more than 1.5 million State and local public employees and their families. For more on CalPERS, visit www.calpers.ca.gov.Here's what it says now:
CalPERS is the nation’s largest public pension fund with more than $190 billion in assets. It provides retirement and health benefits to 1.6 million active and retired state, local public agency, and non-teaching school employees on behalf of 2,600 public employers. For more information about CalPERS, visit www.calpers.ca.gov.CalPERS has lost around $50 billion (21%) this year, and $30 billion in the last three weeks! Ouch! Here's a graph of the CalPERS PR Fund Size Indicator for 2008 (Note: The scale doesn't start at zero to better illustrate change):
Found a CalPERS agenda item discussion paper on the issue (pdf warning). If the 20% losses remain in place after fiscal year end, CalPERS will only be 68% funded for 2009. This means that California state employer contributions will have to increase by 2%-4% of payroll. State payroll is around $16 billion per year, so that's another $540 million in additional unanticipated spending on top of the $7 billion deficit the state already has. Also, the increases will add up well into the future. From the report:
Beyond those fiscal years, if CalPERS does experience a negative return in 2008-2009 as illustrated above then employer rates would likely continue to rise slowly over time even if CalPERS earns its anticipated 7.75% return. It would take returns well in excess of 7.75% in subsequent years to prevent a steady rise in employer rates.Since the state is on the hook for any losses CalPERS sustains, there's really no upper limit to what this will cost the state. In addition, there's a huge retirement wave approaching that will strain the retirement fund like never before.
If for example the investment return in 2008-2009 remains at -20% for the fiscal, investment returns of 7.75% in the next few years would result in increases in employer rates of about 0.2% to 0.6% of payroll each year. Under that scenario, it would take a return in excess of 28% in 2009-2010 to prevent further increases in rates in subsequent years.