California's largest pension system - along with most state and local pension systems in the U.S. - insist on maintaining unrealistically high investment return percentages (in the case of Calpers, 7.75 percent). Well, guess what: It's not likely to happen this year - not a huge surprise for anyone checking out investment yields recently. This could present problems because the pension fund is obligated to pay off retirees, although Calpers officials insist that over the long haul, which is the way pension funds operate, it'll be all right. From Bloomberg:
That's going to be tough this year and maybe for the next few years," Calpers Chief Investment Officer Joe Dear said in a Bloomberg Television interview yesterday. "This low-return environment is structurally driven, and there's not a lot of policy to move it." The fund earned 20.7 percent in the 12 months ended June 30, its best result in 14 years, led by gains in stocks and private equity. Since then, Calpers's value has dropped by $20 billion to $218.6 billion as of Sept. 26, as global stocks declined 18 percent. Even with the fiscal 2011 gains, the pension fund has earned 3.41 percent annually on average in the past five years, 5.36 percent in the last 10 and 6.97 percent in the last 15.
I haven't checked recently on what's happening with L.A.'s pension funds, but any shortfall could put additional pressure on the city's general fund.