Last Week’s Market Rollercoaster Sent State Pension Funds Reeling


Chaos in the market has slammed state pension funds, just as they were starting to recover from the 2008 financial crisis.

Here’s a breakdown, via the AP:

  • CalPERS, the nation’s largest state-funded pension plan, has lost at least $18 billion — about 7.5% of its $327.5 billion total value — since July 1. Just last month, California’s two public pension funds reported more than 20% investment gains for the fiscal year ending June 30.  
  • Florida’s state pension fund has lost about $9 billion since June 30, a 7% decline from its $119.4 billion valuation last week. 
  • The Virginia Retirement System’s assets were valued at $51 billion at the end of last week, down from $54.5 billion on June 30. 
  • New York will not say how much the state pension fund lost during last week’s roller coaster, but the fund is nearly $8 billion below its pre-recession value. 
  • Kentucky’s public pension fund investments have declined $1.7 billion — 15% — since July 1. The state owes more than $20 billion in pension debt.
  • The Pennsylvania Public School Employees’ Retirement System has dropped as much as 3% in value since July 1.

The pension problems add to the already overwhelming financial woes of many states.

A new report from the Institute for Truth In Accounting, a nonprofit government accounting watchdog, found that states have used accounting tricks to hide $1 trillion of outstanding bills — primarily unfunded pension and healthcare liabilities — in order to meet balanced budget requirements.

From the report:

“State officials permit themselves the use of antiquated accounting principles — and almost no rules with regard to budgets. The institute’s study found balanced state budgets are largely a myth. This fantasy accounting, along with the political maths necessary to claim state budgets have been ‘balanced,’ is why states with balanced budget requirements are accumulating very large debts and deferred liabilities.”

The report found that Connecticut, New Jersey, Illinois, Hawaii, and Kentucky all have more than $23,000 in debt per taxpayer.

Illinois is in particularly dire fiscal straits. A report from Moody’s Investor’s Service Friday similarly noted that the state’s 2012 budget does not address the state’s backlog of unpaid bills and growing pension liabilities.

The state’s income tax increase, passed in January, will help contain the growth in unfunded liabilities until 2015, when the rates are set to decrease.

At that point, Illinois will be left with a “significant funding burden” to pay its $80 billion unfunded pension liability, Moody’s said in a statement, obtained by Bloomberg.

“Because of its financial weakness, Illinois is less well positioned than other states to handle a renewed downturn in the national economy,” Moody’s said.