Calpers Looks to Shore Up Assets

[Joanne98]

The nation's largest public pension fund said it intends to tap California public employers for more money if its heavy investment losses don't reverse, a sign that more financial pain could be in store for state and local governments.

The California Public Employees' Retirement System, known as Calpers, said its assets have declined by more than 20%, or at least $48 billion, from the end of June through Oct. 10.

Unless returns improve, Calpers is poised to impose an estimated increase in employer contributions of 2% to 4% of payroll starting in July 2010 for about two-thirds of its state-employer members, and in July 2011 for the remaining third. Any decision will be made after Calpers knows its returns for the fiscal year.

The average employer contribution rate for public agencies including cities and counties is 13% of payroll in the current fiscal year, Calpers said.

A Calpers rate increase would add to a fiscal mess in California, where falling sales-tax and income-tax revenue and a tanking real-estate market have affected government agencies across the state. With budget cuts for state and local governments projected in coming years, an increase from Calpers would be one more burden.

The news "bodes very badly for us," said Lori Ordway-Peck, assistant superintendent of business services for Burbank Unified School District, which serves about 15,000 students near Los Angeles. "Something would have to give to find that money.

Joe DeAnda, a spokesman for California Treasurer Bill Lockyer, said "the most obvious impact is going to be on taxpayers, who will have to fund any additional increases" to Calpers contributions, though he added that the treasurer is maintaining hope that a market recovery will minimize, if not eliminate, any additional burden. H.D. Palmer, a spokesman for the California Department of Finance, declined to comment, as Calpers hasn't yet decided whether to enact the increase.

With most economists forecasting a recession in the U.S., and at least a slowdown abroad, analysts see a tough road ahead for corporate earnings, and expectations for the stock market are low.

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