Calpers shows why cities and states are in such trouble

California's giant public pension fund returned just 1 percent for the year ended June 30, which compares with a projected return of 7.5 percent. That's a huge difference - and it means that state and city governments could be on the hook for more money than they bargained for. Not great news considering that state and city governments hardly have any extra cash lying around. And making good on pension obligations usually means that something else has to get cut. It's the third time in five years that Calpers has failed to reach its 7.5 percent threshold, though these numbers do tend to fluctuate quite a bit. From the WSJ:

"The last 12 months were a challenging period for all investors,'' Joe Dear, Calpers's chief investment officer, said Monday during a conference call. As the nation's largest public-pension investor, Calpers is viewed by its peers as a bellwether. Historically low interest rates, volatile markets and slow economic growth have shaken many public funds' confidence in their ability to meet investment targets. Calpers's underperformance was particularly stark because the fund missed many of its own internal benchmarks. Mr. Dear blamed the fund's negative 7.2% stock return partly on the selection of certain investment managers. He didn't name them.