California pension systems lose $105 billion

That's almost a fifth of the investment losses for the nation's state retirement systems in fiscal year 2009, according to the Census Bureau, another reminder of the state's massive - and unfunded - pension obligations. All of the state public employee retirement systems lost money in 2009, but California lost the most. From press release:

The nation's state retirement systems totaled $2.0 trillion in holdings and assets in 2009, a loss of $641.3 billion (24.0 percent) from $2.7 trillion in 2008, according to new data from the U.S. Census Bureau. This follows a $152.2 billion loss the previous year. These large decreases are mostly attributed to a $484.9 billion decrease in earnings on investments between 2008 and 2009, following a loss of $439.8 billion the previous year. Retirement systems have substantial investments in financial markets and consequently earnings are dependent on changes in market performance.

It's worth noting that 2010 was a much better investment year for the public pension funds, but losses have been so large that it will take years to close the $1.26 trillion gap between what's coming in and what has to go out. From this week's report by the Pew Center for the States:

The $1.26 trillion figure is based on states' own actuarial assumptions. Most states use an 8 percent discount rate--the investment target that states expect to earn, on average, in future years. But there is significant debate among policy makers and experts about what discount rate is most appropriate for states to use when valuing pension liabilities. This is an important issue because, depending on how those liabilities are calculated, states' total funding shortfall for their long-term pension obligations to public sector retirees could be as much as $1.8 trillion (using assumptions similar to corporate pensions) or $2.4 trillion (using a discount rate based on a 30-year Treasury bond). How states value long-term liabilities going forward will play an important role in defining the scale of their challenges and the actions they will have to take to meet them.

Calpers, the state's largest public pension fund, has a target of 7.75 percent.