The good news from the California Public Employees' Retirement System, the pension system that serves about 1.7 million public sector workers, retirees and their dependents: 2013 was a very good year for the fund's investments. CalPERS reported Monday that its portfolio grew by 16.2 percent last year, boosted by last year's runup in stock prices, and is now worth $282 billion.
As the Los Angeles Times reports, the gains are the latest turn for CalPERS' up-and-down fortunes:
The results for 2013 capped a wild ride for the agency over the last 11 years. The fund was especially hard hit during the Great Recession of 2007-09. In 2008, amid the depths of the worst global economic slowdown in half a century, the fund lost 27.8 percent of its value.
Since then, it has climbed back. In 2011, the fund's increase in value was a mere 1.1 percent. For 2012, the rate of investment growth was up to 13.3 percent. By early 2013, the total value of the fund officially surpassed its pre-recession high.
CalPERS' overall rate of return for 2013 was more than twice the 7.5 percent minimum that the fund's board has said it needs to meet current and future obligations to retirees.
CalPERS performance actually was well below the major stock indexes for 2013, which saw the Dow Jones Industrial Average reach a record high and the Standard & Poor's 500-stock index rise about 30 percent for the year. CalPERS saw more modest gains because it is required to balance its portfolio with other assets, like bonds, commodities and real estate, which didn't perform as well as stocks last year.
Beyond the CalPERS report, though, looms the reality that the state's public sector retirement funds are still facing hundreds of billions of dollars in future retirement obligations that it hasn't yet figured out a way to pay for. CalPERS reportedly accounts for about $100 billion of the shortfall. The state's other major retirement fund, the California State Teachers' Retirement System, or CalSTRS, faces another $80 billion in unfunded liabilities.
The Associated Press notes in a story today that despite Gov. Jerry Brown's promise to start tackling the state's biggest fiscal challenges, he's not yet proposing any specific action on CalSTRS. (The system is vital to California teachers because they don't pay into Social Security and thus don't get it when they retire.)