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Calpers In Dire Straits Following Huge Investment Losses, Asks For $600 Million In Funding From Bankrupt California
And now for the latest piece of news in a day that is just replete with green shoots. It appears Calpers has requested $600 million more in funding from the state government, completely disregarding that hours before Arnie was pressing legislators to cut the state's pension costs as he realizes that California with its $20 billion budget deficit is pretty much completely insolvent. As AP reports, "the development is driven largely by huge investment losses by the California Public Employees Retirement System, but also because people are living longer and retiring earlier." Well Austerity will take care of the latter, as for the former, Dr. Kevorkian is, unfortunately, unavailable. The onle winner out of this imminent fiasco: Leon Black, who as primary recipient of Calpers' generous capital, still continues to mindlessly blow money on soon to be bankrupt companies, with the hope that he can extract at least something out of them, even if it means taking a 70% IPO haircut (see Noranda).
More from Reuters:
The increase would be for California's next fiscal year, beginning in July, and would raise to about $3.9 billion the state's annual contribution to the pension fund, known as Calpers, the biggest U.S. public pension fund.
Schwarzenegger in unveiling on Friday his budget plan for the next fiscal year, said that overhauling the state's pension systems to reduce their cost to the state's general fund is a top priority, an idea backed by fellow Republicans in the legislature's minority.
Democrats, who control the legislature, are reluctant to take up the issue.
Pubic employee unions allied with Democrats are concerned their members could be placed into a two-tier pension system in which new public employees would receive reduced benefits.
The unions are also concerned their members would have to contribute more to their retirement plans.
A Calpers spokesman said the fund's request for additional state money follows a study presented to the fund's board last month that forced new actuarial assumptions to account for longer life-spans. He said the request also takes into account declines in the value of fund investments along with a policy aimed at improving the retirement systems' long-term funding.
h/t Leo K.
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Didn't see it in the article above, but other papers are reporting Calpers was originally expected to ask for $200mm.
200 more than their original request of 400
Actually, Dr. Kevorkian was recently paroled.
Who's first?
Not me - got a flat tire, can't make it...
let the austerity begin.
The first of many, many dominos to fall.
You are so right. CalSTRS might be next.
And yet, no one is charged?
The Dems in Sacramento will never cut spending.
That is all.
LA Times has it also:
CalPERS plans to seek $600 million more from the state
Not what Arnie had in mind as the budget spirals out of control and the state faces insolvency.
Couldn't they just make a movie out of it and recoup some of their losses? Star Arnie. Call it the Exterminator!!
Call up Jim Cameron.
Cameron doesn't do porn.
Besides a movie called "Arnie Loses his Cherry" just sounds too gay and won't sell.
http://research.stlouisfed.org/fred2/series/CP?cid=109
Nonsense, Mr. Black should have no problem making insane bank on the upswing. After all, the hilariously gigantic swings in reported corporate profits since 2001 are merely just blips on the radar. I'm sure their advisory staff has it all under control and that they're modelling is sound.
I don't know how this whole thing works. The state just give $600M to the pension fund? or what? is the State allowed to give that much money to the pension fund? That sounds totally nuts
IOUs BITCHES!
It is a big shell game. You move the liability off Calpers balance sheet by issuing state debt. It was tried in NJ with disastrous results.
So CALPERS goes bankrupt and... wait for it... rolls their members over to the Pension Benefit Guarantee Corporation (along with a bunch of other public unions whose states have gone bankrupt trying to fund their pensions.)
Do that enough and it adds up to some serious money. At least the Feds have a printing press and the abilty to redefine CPI.
New members? Is the state hiring anyone?
Never fear, guys. The way things are going, you will most likely be placed into a one-tier system in which you will receive NO benefits.
...so when does the default avalanche start?...it just takes one and the others will jump in.
Summer 2007
Politician promises to be Robin Hood --> ignorant asses who should be working on a farm picking lettuce vote for Robin Hood --> Robin Hood/politician borrows money to piss away on ignorant asses for twice (thrice?) what they are worth --> ignorant asses pay part of their payola to union --> union buys political race for next Robin Hood --> rinse, repeat 50 times --> USA, 2010.
Did I leave anything out?
Yeah, just the part where Robin Hood's predecessor thought he was being safe by putting the money into a mutual fund which could only buy AAA securities, many of which were sub-prime mortgages.
...and the part where the predecessor to Robin Hood's predecessor's equivalent in Congress passed laws forcing banks to make a serious portion of their loans shitty loans or else, and then later incentivized banks to do so, via the merry men Fannie and Freddie, and of course with help from the ratings agencies and wholesale subterfuge covering the smell of these.
Maybe I'm way off base here, but if you're Wall Street and you see these huge pools of dumb money, pensions, 401k, 403b, Mutual funds etc. and you have forever and a year to game the system unregulated, wouldn't you try to take as much of that money for yourself as you possibly can? Wouldn't you be doing your investors a disservice if you weren't trying to game the system and take all this money?
Viva la vig!
GSD - Did I leave anything out?
union buys political race for next Robin Hood
I see this a lot, and while I pretty much agree, the rant always stops with the unions when it seems to work the same way with every entity that sucks from the tax payer via the gov.
Targeting the unions for this kind of behavior is safely sanctioned.
You could say something similar about insurance companies and healthcare.
Banksters and [non]bank regulating.
Does anyone know where most of our foreign aid goes? Does anyone think the same kind of kick-back process goes on?
"the development is driven largely by huge investment losses by the California Public Employees Retirement System, but also because people are living longer and retiring earlier."
Too bad they did not SAVE more of the funds, and Invest more to begin with.
California,has go to be at least ON PAR w/ NYC, for welfare/Immigant freebies..................when you have 4-5th Generation Welfare, how can you possibly expect to maintain, when times get tough?.
It's like the old wife joke, " I can't be out of money, I still have checks!".
Politicians look at it differently, their not out of taxpayers.Sadly, you dumb shits, your out of jobs, but you keep pumping out the freebies........
Sooner or later, their going to realize that Sanctuary cities, and supporting a second country's citizens, & welfare, takes more than you can ever bring in.....
That leaves Awneeee, what is commonly called a DEFICIT.
Yeah but isn't part of the problem that these pensions are unfunded? Maybe I am thinking of corporate pensions or government pensions, but can't the state borrow from pension funds too with a promise of paying it back when "things are good" LOL.
Off topic, regarding DNC's selected Dodd replacement:
Walter Sobchak was quoted as saying, "Those rich fucks! This whole fucking thing... I did not watch my buddies die face down in the muck so that this fucking strumpet..."
Typical, "I Misrepresented"............
Only a Pol would call a BALD FACED LIE, a Misrepresentation.
It's like a tape of a Mayor snorting coke, w/ a hooker, and denying it,fighting to stay in office.
We have nothing but CRETINS running the show.
Saying several times that he served in Vietnam, when he didn't, just shows the voters that he is the perfect choice to fill Dodd's shoes. They probably won't even notice the transistion.
From the public and media giving John Kerry a pass for his lies and exagerations of his short Vietnam tour, to the treatment the media is giving this liar, it's a short step. It's down the rabbit hole stuff.
He did serve in Vietnam, it was just from Connecticut.
Hmmm... isn't that almost exactly the size of the loss Calpers took in Stuy Town?
Naw, gotta be pure coincidence.
I think they should take it out of BlackRock's ass. After all, BR did the ultimate ruthless default on them, when it was perfectly capable of paying the coupon.
At some point, the pensions will switch from asking the universe for more money, to explaining to their members that they're simply going to get less in benefits than they thought.
It will happen, but they'll try every trick in the book to put it off until the last possible second.
Will the last taxpayer to leave, please turn out the lights.
here comes another 30,000 early parolees from San Quentin, Pelican Bay and the other Gladiator academies...
CCalifornia Dreamin baby...
Ben Richards will take care of those criminals.
yup, all those dangerous offenders arrested for a dime bag in the park.
WAR ON DRUGS BITCHEZ
I know, right?
Sigh. If they weren't dangerous on the way in, they're probably dangerous now. What a world.
MP
Hey, anyone seen my 401K. It was here earlier. What....what's an annuity? They nationalized what? I can't hear so well with my head exploding.
Every month they ask for $600 million don't they? Can we buy some more Cali bonds at 8.5%? When will the website be re-opened for bond sales?
I find it interesting that Californian schemes have dismissed the conclusions of a study by the Stanford Institute for Economic Policy Research (SIEPR), which claimed the funding level of the three largest Californian pension funds has so far been understated due to the accounting rules used. The study found that CalPERS, CalSTRS and the University of California Retirement System are underfunded by a combined $500 billion.
CalPERS's response to the study:
This is a standard response from all pension parrots, especially when justifying their meagre results. The fact is that I can criticize CalPERS on every single point made above, including the illusion of diversification.
pension funds - the dumbest money on the planet
Here is a link to the Stanford Study, Going For Broke: Reforming California's Public Employee Pension.
When you see a figure like $200b under management, the first question ought to be:
For your chosen asset allocation, net of fees and expenses, have you outperformed an unmanaged index of equal weightings?
Edited: Ah, the internet knows this.
- Here is CALPERS portfolio allocation as of 2/28/2010:
53.0% equity
11.6% alternative (PE, VC)
24.60% global fixed income
6.90% real estate
1.40% cash
- Here are their returns (ending 2/28/2010):
1-yr: 12%
3 yr. -4.88%
5 yr: 2.49%
10 yr: 3.10%
OK, that flat-out sucks. Pension plan participants would have been far better served if they'd just bought index products. $200b is entirely too much money to be screwing around with small-cap and venture level investments. Why are they even fucking with a New York real estate development like Stuy Town?
3.1% over the last 10 years, huh? And CalPERS assumes an 8% return in order to be solvent.
Hmmm... I see a problem here....
The reason why they invest in small cap and venture level investments are just that, they are "small" and out of sight and out of mind. I bet my last dollar that much of those investments our through friends and friends of a friend. With that much cash wallstreet hustlers know that they are up for anything that will give a good return or promised a good return, and if not as long as the participants who work for the Pensions are getting paid via consulting fees and such. So imagine that I set up a business to buy 500 million of residential realestate in New York (prime realestate), but need money to help with the financing. What happens is my business partner or someone I know that work for Calpers can help me walk this investmen deal through the levels of govt. to get the money and tell them how good the return will be.
Then the "fees" that the govt. officials will get in helping me with this deal makes it a go and the deal is done. A few years later the housing market tanks and the money I and my business partner used to buy all this wasn't enough, but I was able to get more money and refinance by showing to other banks that Calpers was a major contributor to the deal and talk that up. So even though the whole deal fell through and we as a business told the bank/Calpers to take the property, we walked away with millions via accounting and fees and pay etc.. Pension funds are big cash cows for casinos and the politicians.
I have lost touch with this, but are we still using **cough** mark to myth **cough** on all those assets in which these pension ponzis invested?? If so, this gets pretty scary pretty damned fast.
Pay no attention to the man behind the curtain.
Just checking my premise. That curtain is "wayfare theen"
i am certain that the unions are calling their Greek cousins on the most constructuive ways to present their concerns to the relevant authorities.
Well - who else is going to give them a bridge loan for this?
"After losing $500 million on a controversial New York real estate deal, CalPERS is being asked to put more money into the same property."
After losing $500 million on a controversial New York real estate deal, CalPERS is being asked to put more money into the same property.Read more: http://www.sacbee.com/2010/05/14/2749686/new-yorker-invites-calpers-back.html#ixzz0oJkK2STa
Send all Californians to the gold mines and let them work for free for 1 year. Those who mine 100 kg. of gold can go home. Al te rest has to try again from scratch.
Here is a blurb from Richard Russell from last night's report. Richard does not express concerns this blunt. It thus, caught our eye. He states the following regarding the economy and markets. Good luck everyone.
Russell suggestion -- Do your friends a favor. Tell them to "batten down the hatches" because there's a HARD RAIN coming. Tell them to get out of debt and sell anything they can sell (and don't need) in order to get liquid. Tell them that Richard Russell says that by the end of this year they won't recognize the country. They'll retort, "How the dickens does Russell know -- who told him?" Tell them the stock market told him.
Here's a link (coincidentally featuring a photo of a ZH'er in uniform): http://www.businessinsider.com/dow-theorist-richard-russell-sell-everyth...
Smart ass. ;-)
CALL YOUR STATE'S Senator or prostitute (however you wish) and URGE them to support Sen. Whitehouse's amendment to overturn the National Bank supreme court case (and others) which disallowed state's to CAP USURY rates for out of state banks. This created the national credit card whores in the Dakotas to get the nation on their no cap rates.
I think this is more important, long term, than most amendments. It will be a huge stimulus, as well. 10-15% could be shaved right out of the banks into your pockets.
Some of us never thought we'd see this day and it came up so fast, without much news, unfortunately.
SLAM THEM WITH CALLS if you're interested.
The calls harry the receptionist - that's all. They're accustomed to ignoring constituents now.
The politicians and their staff pay attention to two things (aside from donors): the mainstream newspapers and the television.
Focus your efforts on those avenues instead. Work individual journalists and possibly their editors.
+ 36.5 %
Fire Every Top Executive and Manager at CalPERS
As a Cali taxpayer... I would job the whole pension shit hole out to Tyler and some qualified ZHers to run...
You Knew These Morons Would Double Down After March 2009 and Lose Even More
If me and ten of my friends can beat the Raiders... then Tyler and some ZHers could beat CalPERS management (or is that mismanagement) of returns on retirement funds...
NOTE To Leo: Cali is still #1!!!
In foreclosures, unemployment and now pension losses...
"Pubic employee unions allied with Democrats are concerned their members could be placed into a two-tier pension system in which new public employees would receive reduced benefits.
The unions are also concerned their members would have to contribute more to their retirement plans."
For point 1: don't worry, it'll be a single plan-- scorched earth.
For point 2: contribute more? I doubt they contribute squat to begin with.
I can give you real-world examples: I know 2 retired Calif teachers who are receiving 100% of their final salaries as their pension. And generous med benefits w/small copays. They retired at age 55 and have been collecting for 10 and 12 years respectively. They both probably live til 80 or so, meaning 25+ years of full pay for someone not to work. Hope those investments are doing well. Oh wait...
Meanwhile, the dipwad fund mgrs at Calpers invested in every possible piece of shit investment there is. I'm sure they're super deep in Greek Bonds, short gold, long every TBTF bank, Euro and every other fucktard move possible. Calpers is trying to be TBTF, but there's no way for us to pay (since we don't print the fiat currency here). They are so far beyond fucked, they can't even take a bus back to fucked.
Hard to imagine Californians serving Russian cocktails on the streets of Sacramento...
Those dudes will just abide.
The state of CA is run by crooks http://articles.latimes.com/2009/nov/05/business/fi-calpers5/2
Google "Alfred Nash Villalobos"
He's apparently a not just an investment kickback crook, but an immigration fraudster too.
Note no criminal indictment, but the CA AG is jerry Brown, whose own seester Kathleen (former CA treasurer) also served on the CAPPERS board, she also I believe served on the multi billion dollar Cal endowment board.
Campaign contributions coming from public employee unions to legislative and congressional candidates and office holders so far have kept their members floating well above the recession. Raises and contracts have no hint of the struggle that private sector employees are experiencing. And to keep those lucrative contracts in place, more tax payer dollars are needed. The number one big spender on politics in California--“far more than anybody else”--is the big public employees unions:
In Sacramento, Tribes Have Become Bigger Players Than Power Companies | California Watch | 03/12/10
Gaming Indian tribes have emerged as bigger players in Sacramento than the power companies that dominated California politics for much of the 20th century.
The pharmaceutical lobby’s political spending is nearly triple that of the state chamber of commerce.
And when it comes to money and politics, nobody approaches the big public employees’ unions, who spent more than $383 million in the past decade on lobbying and campaign contributions.
Those are some second-day insights drawn from “California’s Billion Dollar Club,” a study of a decade’s worth of lobbying and donation reports prepared by the state Fair Political Practices Commission.
The study...lists 15 mega-donors that combined to spend more than $1 billion on California politics since the dawn of the 21st century. For good measure, the report added 10 more, thus providing a top-25 list.
The California Teachers Association topped the charts, at almost $212 million in political spending. Slot number 25 on the list is occupied by the Consumer Attorneys of California, whose budget was 12 percent of the teachers, at about $22 million.
The FPPC’s report didn’t analyze its top-25 list according to interest groups, so California Watch did.
1. The big public employees unions combined to spend $383.6 million on politics in California – far more than anybody else.
2. The tribes pumped in almost $280 million. That’s more than double the combined spending of Pacific Gas & Electric and Southern California Edison – utilities that were so powerful in California politics for so many decades. Together, they spent $112 million, and together ranked number 5.
3. Medical interests spent $193 million. The Pharmaceutical Research and Manufacturers of America alone spent almost $105 million. By contrast, the state chamber of commerce spent $39 million.
4. Energy companies spent $136 million.
http://californiawatch.org/watchblog/sacramento-tribes-have-become-bigger-players-power-companies
There's something funny to me about the fact that Arnie would be at the helm at the time of California's implosion. He had no idea what was about to happen to him when he took over from Gray Davis in 2003. It's too early to tell for sure, but I think he has blown his legacy in a way that's pretty much irretrievable.
Arnie took on the public service unions in 2004 and lost.
Here 50% of people pay no taxes, 30% directly or indirectly benefit from state pension largesse, it's kinda hard to build a constituency from the remainder.
not to worry! The Center for State and Local Government Excellence in collaboration with The Boston College Center for Retirement Research issued a report in 2008 called "The Miracle of Funding by State and Local Pension Plans."
http://www.slge.org/vertical/Sites/%7BA260E1DF-5AEE-459D-84C4-876EFE1E4032%7D/uploads/%7B4A9330CF-4365-49E0-896A-F0D3F7C36AC3%7D.PDF
No, really! And the miracle is that we're all gonna bail out the big fat Cali 'Crats. You think La Pelosi hasn't already got Barry all wraped up?
Next in line: Illinois 'crats. The state treasurer--the guy who ran the pension fund into the ground---is a Greek and he's running for governor. Give me Blago back!
It would be nice if CALPERS stopped giving money to Ron Burkle's Yucaipa Companies who subsequently blows it all giving it to Sean Combs to grow Sean John.
Come to think of it. CALPERS giving money to Burkle is just how things work in the Democratic donor-union labor complex.
Take it Californians. You paid for the Clinton Library and the global airfare for your favorite Razorback.
Why don't they just turn over all their assets to GS and split the profits?
Once I was teaching English and Java at a small community college in a developing country. The college had some connection to the Califonia community college system. One day a retired administrator from one of the CA CC districts came over to schmooze and we had a chance to talk.
Over breakfast, he explained how his biggest accomplishment in his 30 year career was surviving 6 bosses and never getting fired. He explained that as he was now retired, he was collecting $85k/year. While collecting, he was rehired by the district as a consultant. He was married, his wife travelling with him. She was also a CC admin., was about to retire and pull the same shennanigans!?!
Unsustainable. Somebody's due for a rude awakening.
Hey California...
Just do the Hellenic hokey pokey!
Step 1. Ban naked shorts.
Step 2. Sue some banks.
Step 3 Problem solved!
It's a big hit. Everybody's doing it!
"Retiring earlier" -- indeed. These lucky souls are the last beneficiaries of the slow-motion ponzi scheme that is the defined benefit pension plan. As a younger govt employee who contributes, I deeply resent subsidizing the retirement funds of the richest generation likely to walk this planet. I contribute at a rate that is easily double what it was less than a decade ago, so the 30-year pensioners must have been contributing, oh, an average of 3.5% of salary compared to my current 8%+ for the same benefit. (And don't you know, that rate is going up every year for the foreseeable future, until there is no take-home pay. At the same time as the pension newsletter announces that, coincidentally, an "actuarial evaluation" has reduced the pension withdrawal payout. At the same time as the contributor's annual statement for the first time no longer informs you what the payout would be if you exited. Security through obscurity!)
I try to explain this pension-system wealth transfer to anyone who will listen, but they don't share my rage. My rage is doubled because most of the union mo-fo's were paid over market by 20% for cushy jobs in the first place.
If only they went all in Gold at the turn of the decade...
Inconceivable. No crony kick back involved.
At what point do state workers decide to make a run on their pension accounts ? What would happen to the pension system if they did ? In the state where I work, some are already eyeing the exits, and more are starting to talk about wheather to take a percentage of what's there now, rather than a percentage of ZERO later. Unfortunately we're held hostage, you can only take the half you paid in when you leave, otherwise take penalty after penalty trying to retire early. Of course if you take the half you paid in, it ends up being capital gains, and puts your income up in the Obama tax me extra bracket....I don't think the pbgc can afford to bail out calpers.
Yes the tell will be when connected insiders commute the net present value of their expected future benefits for a lump sum.
Not sure if this was mentioned - but CalPERS doesn't have to ask.
By law, public pensions in Calif. must be fully funded. If CalPERS falls short they can legally demand that the state or municipalities make up the difference.
That's the root of the problem. An insane system
Local,County,State,Federal Budgets could
save $ 300 Billion a year by just ending
"THE WAR ON DRUGS " , ( THE WAR ON PEOPLE )
AND BEGIN THE WAR ON STUPID GOVERNENT MANDATES
AND CORRUPT POLITICS