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Largest US Teacher Pension Fund Underfunding Increases By $9 Billion To $64.5 Billion, Only 69% Funded

Tyler Durden's picture


While the epically underfunded status of the US, by all definitions a ponzi scheme, whose combined liabilities have a net present value of about $100 trillion, is known to everyone, most can simply shake it off for too reasons: 1) it is a number too big to comprehend, and 2) by the time the ponzi blows up it will be some other generation's problem. However, it may not be so easy for California's retiring teachers. Minutes ago, CalSTRS, or the California State Teachers' Retirement System, with a portfolio valued at $152 billion as of February 29, 2012, and is the largest teacher pension fund in the United States, reported that its underfunding increased by a massive 15%, or from $56 billion to $64.5 billion, which happened despite the market being relatively flat over the past year. In fact this is supposed to be good news: as CalSTRS states, its underfunding was supposed to be even worse by $4.3 billion. So this is really good news. We wonder how good the news will be to tens of thousands of retiring and retired teachers once they understand that their obligations are only funded 69%. And dropping. But wait, there's more: new normal, no new normal, here is what CalSTRS did: it reduced "the assumed rate of investment returns from 7.75 percent to 7.5 percent, which increased the funding shortfall by $3.5 billion." In other words, if the market grows at a true New Normal of 1-2%, or worse, is flat over the long run, we wonder if the obligation coverage ratio would even be in the single digit percentage.

From the Press release:

The Teachers' Retirement Board, the governing body of CalSTRS, today adopted the actuarial valuation of the Defined Benefit Program as of June 30, 2011. The valuation reflects a two-percent decrease in the funding status from the previous year, as the final impact of the extraordinary losses in 2008-09 is recognized.

The latest valuation shows a funding status sufficient to cover 69 percent of projected liabilities, leaving the fund with a $64.5 billion funding shortfall. The funding status means that for every dollar in pension obligations the fund has 69 cents worth of assets available. The previous valuation showed the funding shortfall at $56 billion.

The growth in the funding shortfall, however, is $4.3 billion less than was previously predicted, due primarily to the initial recognition of a 23.1 percent investment return for the 2010-11 fiscal year. The current valuation also reflects the final year in which the losses from the 2008-09 financial crisis are recognized. CalSTRS uses a three-year process to "smooth" or even out gains and losses to the system.

"Although healthy returns in 2010-11 reduced the magnitude of required future contributions, we cannot count purely on investment earnings to bring this crucially important fund back to financial health," said CalSTRS Chief Executive Officer Jack Ehnes. "What's needed now in the pension reform discussion is a long-term funding plan that only the Legislature and Governor have the authority to implement. CalSTRS is committed to working with all of our stakeholders to develop a plan that is both gradual and predictable for our members, their employers and the State of California."

The valuation continues to reflect the inability to bridge CalSTRS' funding shortfall without increases to contribution rates. Bringing CalSTRS to full funding would require an additional payroll contribution of 13 percent above current levels. This decreased from the previously required 14 percent of payroll. Absent any changes in contribution rates or liabilities, current projections show the fund will deplete its assets in about 35 years, which extends the anticipated lifespan of assets from the 30 years outlined in the prior valuation.

The actuarial valuation is a snapshot of the fund's financial health, comparing its assets to its long-term projected liabilities. The valuation projects the extent to which the current and future assets of the Defined Benefit Program are sufficient to pay the benefits promised to CalSTRS members for their service. If the actuarial value of the assets is less than the value of obligations, then an unfunded obligation, or funding shortfall, exists.

Among the factors slowing the growth of the funding shortfall are:

  • Extraordinary 23.1 percent returns as of June 30, 2011, which closed fiscal year 2010-11 and, like losses, are also recognized over three years. This year's recognized gains shrank the shortfall by about $7.5 billion.
  • The lower-than-expected projected payroll earnings for 2010-11 reduced the growth of the funding shortfall by $4.5 billion.

Several factors contributed to the growth of the funding shortfall, including:

  • Recognizing investment losses from 2008-09, which raised the funding shortfall by $12.7 billion.
  • Reducing the assumed rate of investment returns from 7.75 percent to 7.5 percent, which increased the funding shortfall by $3.5 billion.

The California State Teachers' Retirement System, with a portfolio valued at $152 billion as of February 29, 2012, is the largest teacher pension fund and second largest public pension fund in the United States. CalSTRS administers a hybrid retirement system, consisting of traditional defined benefit, cash balance and defined contribution plans, as well as disability and survivor benefits. CalSTRS serves California's 856,000 public school educators and their families from the state's 1,600 school districts, county offices of education and community college districts.


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Thu, 04/12/2012 - 16:07 | 2339183 Seasmoke
Seasmoke's picture

Leo must be spinning in his grave !

Thu, 04/12/2012 - 16:09 | 2339190 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

He is ok.  He is busy buying the dips in solar.

Thu, 04/12/2012 - 16:19 | 2339248 Sancho Ponzi
Sancho Ponzi's picture

The last fund that consistently returned 7-8% was Madoff's ponziCon.

Thu, 04/12/2012 - 17:49 | 2339571 ElvisDog
ElvisDog's picture

Exactly, the 7.5% assumption is a joke. They should use a 10 year moving average of returns on the S&P 500 for their forward assumptions, which would give them... Oh, wait, never mind.

Thu, 04/12/2012 - 20:32 | 2340046 Freddie
Freddie's picture

7.5% is impossible with ZIRP.  If they are holding 60% bonds to 40% stock with a mix of hedge funds and private equity - there is no wau they should assume 7.5%.  6% is probably too high.  

Thu, 04/12/2012 - 22:00 | 2340279 Buck Johnson
Buck Johnson's picture

If your a govt. (local or federal) or business to big to fail, you can use ponzi economics to forecast.  But the problem with all this ponzi is just that a ponzi.  Eventually the reality of the delusion comes into being and they haven't been making that 7 to 8 percent every year and only 1 to 2 percent if not breaking even.  So the 69% that was reported to us as being funded to that amount may be a big fat lie. 

Thu, 04/12/2012 - 16:19 | 2339250 realitybiter
realitybiter's picture

that's a lotta dips

Thu, 04/12/2012 - 17:35 | 2339526 J 457
J 457's picture

They fail to mention the pension deficit is backstopped by the CA taxpayer.  That's the much bigger story.  Check CalPRS as well. 

Thu, 04/12/2012 - 19:25 | 2339878 sun tzu
sun tzu's picture

The California taxpayer is basically broke. 

Fri, 04/13/2012 - 00:31 | 2340700 NOTfromSanFrancisco
NOTfromSanFrancisco's picture

@ sun tzu   "The California taxpayer is basically broke."


We have been broke, unemployed, illegally immigrated and thoroughly entranced with "Dancing With the Stars" for some time now...

Fri, 04/13/2012 - 01:47 | 2340795 The Navigator
The Navigator's picture

Broke? Ha! You ain't seen nothing yet. Wait until the boomers retire and move out of state for a lower (1) income tax rate and (2) sales tax so they can afford a daily meal at hometown buffet. Take away 5%-10% of the CA population paying the income and sales tax and that pig will really squeal. The more they tax, the more that will run - hell, anyone with gas money is going to run to AZ and rent a PO box (then register as an AZ resident) and then 90% of the cars here will have AZ plates.

Want to go long on something - buy a cheap house in AZ and rent out virtual residency on that address. 1,000 subscribers @$50/mo and you might make some money. When you do it let me know - then I can buy some pistols on the CA restricted list.

Thu, 04/12/2012 - 16:11 | 2339205 The Alarmist
The Alarmist's picture


There, fixed it for you.

Thu, 04/12/2012 - 16:08 | 2339186 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Nobody retire and everything will be fine!

Thu, 04/12/2012 - 16:25 | 2339268 Rainman
Rainman's picture

Another serious unmentioned problem in Cali is that the gazillion administrators are spiking the hell out of their final year salary....often to make much more in retirement than when they were working.

Fri, 04/13/2012 - 01:50 | 2340802 The Navigator
The Navigator's picture

No problem - old Jerry Brown is talking about raising to top income tax rate from 10% to 13.x% - that'll fix it for another 2 years.

Thu, 04/12/2012 - 16:45 | 2339341 Chuck Walla
Chuck Walla's picture

Nobody retire and everything will be fine!


They could die early even without Obamacare. But, I now see the need for Obamacare.  Makes it easier to kill off all those pension/SSD obligations.  The man is a genius!

Thu, 04/12/2012 - 16:50 | 2339357 narnia
narnia's picture

even if no one retires, the CA public school system still costs $28,000 per year per student that actually graduates

Thu, 04/12/2012 - 17:02 | 2339398 mrdenis
mrdenis's picture

Hell in new Jersey we already spend more than that on our students "The governor then said that despite spending nearly $30,000 per pupil, less than half of Asbury Park students can pass 8th-grade level math.".....
Thu, 04/12/2012 - 22:59 | 2340470 10mm
10mm's picture

Asbury Park.Hmmmm,gee i wonder why.

Fri, 04/13/2012 - 04:46 | 2340924 Peter Pan
Peter Pan's picture

Or everybody die so nothing has to be paid out. Once they start pulling back on medical care that is what will happen.

Thu, 04/12/2012 - 16:13 | 2339189 The Alarmist
The Alarmist's picture

Reducing the expected return would not reduce the funded position, though it would increase the net periodic pension cost. Under-performing the expected return would certainly lead to a greater shortfall. In other words, they goosed prior expectations to lower the costs in earlier periods, and now they are taking it in the shorts.

Thu, 04/12/2012 - 16:11 | 2339191 Mercury
Mercury's picture

We wonder how good the news will be to tens of thousands of retiring and retired teachers once they understand that their obligations are only funded 69%.

I doubt they're fretting at all actually because there isn't a chance in hell they won't get paid one way or the other.

Thu, 04/12/2012 - 16:26 | 2339271 LFMayor
LFMayor's picture

Yeah, because one night, they'll put on their wolf suits and make mischief.
Where the Wild, Starving, Abandonded Socialist Teachers are.

Thu, 04/12/2012 - 17:34 | 2339519 SAT 800
SAT 800's picture

I don't understand the assertion; I think there's practically a guaranteed result that they don't get paid; (one way or the other); like with "money" inflated to donuts for instance.

Thu, 04/12/2012 - 23:47 | 2340605 Mercury
Mercury's picture

The municipality, the state or the Feds (or some combo) will make taxpayers pick up the difference.

Thu, 04/12/2012 - 19:34 | 2339906 CH1
CH1's picture

I doubt they're fretting at all actually

Because they can't do the math?

Thu, 04/12/2012 - 16:08 | 2339192 Sudden Debt
Sudden Debt's picture

As long as it's not the math teachers fund, there no real problem right?

Thu, 04/12/2012 - 17:33 | 2339513 SAT 800
SAT 800's picture

Correct! The "other teachers" don't even know what 69% means !

Fri, 04/13/2012 - 05:21 | 2340947 Sokhmate
Sokhmate's picture

They probably know what it means.. without the wierd sign after the 9.

Thu, 04/12/2012 - 16:12 | 2339194 SheepDog-One
SheepDog-One's picture

We're short by $9 billion on the quarter...but wait! Thats GOOD NEWS!

I guess I could therefore tell the bartender I'm short paying my $800 bar tab by $750, but thats GOOD NEWS for him because I thought I'd be $800 short.

Thu, 04/12/2012 - 17:35 | 2339522 SAT 800
SAT 800's picture

There you go ! The new Normal.

Thu, 04/12/2012 - 16:11 | 2339195 bob_dabolina
bob_dabolina's picture

Why don't they just continue vilifying millionaires and have them pay for the short fall?

Fuck it, just seize all the millionaires assets. It's not fair they're rich anyway.

Thu, 04/12/2012 - 16:15 | 2339223 The Alarmist
The Alarmist's picture

Because in CA the millionaires are mostly political donors or public servants.

Thu, 04/12/2012 - 16:17 | 2339233 bob_dabolina
bob_dabolina's picture

These teachers shouldn't be compensated at all.

The quality of students they produce is shit.

Thu, 04/12/2012 - 16:38 | 2339303 GeorgeHayduke
GeorgeHayduke's picture

Yeah, it's the teachers' fault. It has nothing whatsoever to do with administrators, the military industry and "the business community" wanting the schools to put out unthinking, unquestioning, order-following consumers to suits their needs.

Try looking at the whole picture, not just those parts of it that suit your limited worldview.


Thu, 04/12/2012 - 17:16 | 2339449 dogbreath
dogbreath's picture

yup,  criticize excessive socialist entitlement and get attacked by saying " look at the other pigs getting fat"


we're fucked

Thu, 04/12/2012 - 17:29 | 2339491 GeorgeHayduke
GeorgeHayduke's picture

We're fucked because this entire system has been loaded with so-called "entitlements", corruption and "something-for-nothing" thinking at so many levels for so many years. Don't act as though teachers and government workers are the the whole reason for the problem, as the so-called private financial sector did their best to get those programs started so they could reap the benefits themselves.

I forgot I should only look at the "entitlments" of those folks the dipshits call socialists. I won't look at the trillions in entitlement we've given to the financial sector the past 4 years. How does this whole pension shortfall measure up to the derivatives market? Sorry...I need to remember to do the mainstream thing and focus on the snowball someone labeled socialist and not look up the mountain to see the avalanche building above us. My fault for looking at the big picture.

Thu, 04/12/2012 - 18:57 | 2339777 Rainman
Rainman's picture

Agree. Pigmen were all over these pension funds. CalPers had its own stable of, placement agents... rounding up the Pigs to feed.

Here's a recently settled CalPers bribery case involving meds.


Thu, 04/12/2012 - 21:44 | 2340222 dogbreath
dogbreath's picture

like I said................

yup, criticize excessive socialist entitlement and get attacked by saying " look at the other pigs getting fat"


we're fucked

Thu, 04/12/2012 - 19:43 | 2339926 CH1
CH1's picture

Yeah, it's the teachers' fault. It has nothing whatsoever to do with...

Oh, I'll stipulate to the others, but the teachers deserve a big, heaping share of blame.

I use to be their victim. I know.

Thu, 04/12/2012 - 17:39 | 2339537 SAT 800
SAT 800's picture

The "quality" of human beings is shit. IQ100 is average; okay? What's that? It's useless. It's amazing the little darlings can remember how to tie their shoes. What do you want the teachers to do about it? Repeal the law of genetic inheritance?

Thu, 04/12/2012 - 18:40 | 2339721 GeorgeHayduke
GeorgeHayduke's picture

Excellent point. As a "mature" parent with a kid in elementary school I am constantly appalled and amazed by many parents at the school with their crappy attire, tattoos, piercings, obsession with the fucking iphone andcomplete inability to converse in an adult manner. The funny part is, those parents that appall and amaze me are likely the kids of these folks bitching endlessly about the schools being failures.

If the schools are shitty, it's likely just a reflection of the culture...all of it, from the "entitlement" socialist they bitch about even in their sleep, to the corporate marketers trying to sell us shit we don't need. But putting it that way forces some ownership onto the sholders of the endlessly bitching conservative types here. They prefer bitching over action or the worst of all responsibilities...setting an example themselves.

Thu, 04/12/2012 - 19:17 | 2339853 Vlad Tepid
Vlad Tepid's picture

Blaming the teachers exclusively smacks a lot to me of Stalin going out and shooting the factory workers when the tanks they were forced to make out of sub-par pig iron broke down.  In computers the phrase "Garbage in-Garbage out" is useful; to BobDabolina, I think it's instructive.

Thu, 04/12/2012 - 19:47 | 2339940 CH1
CH1's picture

IQ100 is average; okay? What's that? It's useless.

Not at all. I know you're venting, but a 100IQ brain can do a hell of a lot.

Lots of 150IQ brains run crap software and spread destruction.

I'll pick the 100IQ brain running good software every time.

Fri, 04/13/2012 - 02:06 | 2340819 The Navigator
The Navigator's picture

Reminds me of George Carlin when he said "we need workers just smart enough to run the machines but not smart enough to know how badly they're getting fucked" = "Obediant Workers"

re IQ - not sure its a valid measurement - I've seen mensas that are dumber than shit and high school dropouts smart as a whip.

Thu, 04/12/2012 - 21:46 | 2340232 dogbreath
dogbreath's picture

yeah and do you want your 110 IQ kid being educated by the 93 IQ teacher.

Thu, 04/12/2012 - 17:36 | 2339527 SAT 800
SAT 800's picture

---Or both!---

Thu, 04/12/2012 - 16:16 | 2339230 pods
pods's picture

Won't work, as NEW debt is needed to keep the ponzi going.  Seizing current debt won't do jack.

(I know your comment is tongue in cheek)

Thu, 04/12/2012 - 16:31 | 2339289 CrimsonAvenger
CrimsonAvenger's picture

But then the teachers will be the rich ones...

We need Dennis Moore on the job. "Blimey, this redistribution of wealth is trickier than I thought."

Thu, 04/12/2012 - 18:06 | 2339623 Its_the_economy...
Its_the_economy_stupid's picture

another good reason to hold phys

Thu, 04/12/2012 - 16:10 | 2339198 monopoly
monopoly's picture

I am loving all this good news. CA. the best and a state that cares about its people.

Thu, 04/12/2012 - 16:11 | 2339202 Bam_Man
Bam_Man's picture

Let them eat iPads.

Thu, 04/12/2012 - 16:11 | 2339206 Sudden Debt
Sudden Debt's picture

I've heard "the subsitute" isn't happy about this... Not happy AT ALL!!!

Thu, 04/12/2012 - 16:13 | 2339209 JustObserving
JustObserving's picture

Keep this in perspective - US unfunded liabilities (Medicare and Social Security) increase by $18.2 billion each and every day.

Thu, 04/12/2012 - 16:13 | 2339219 bob_dabolina
bob_dabolina's picture

Yea, the good news is it could be worse.

Thu, 04/12/2012 - 16:23 | 2339258 krispkritter
krispkritter's picture

Welcome to the USS Titanimerica! Would you care for a libation and a life jacket?

Fri, 04/13/2012 - 12:51 | 2342067 Freddie
Freddie's picture

There are no life jackets.

Thu, 04/12/2012 - 16:14 | 2339220 pods
pods's picture

So they still go deeper in the hole with 23% returns?
This is going to end well.


Thu, 04/12/2012 - 16:58 | 2339385 The Alarmist
The Alarmist's picture

The 23% returns for 2010/2011 didn't begin to cover the 26% losses for 2008/2009 (they lost something like $42B in that period).

To be charitable, this report is a pile of steaming bullshit with a little lipstick for good measure.

Thu, 04/12/2012 - 18:07 | 2339625 Its_the_economy...
Its_the_economy_stupid's picture


Thu, 04/12/2012 - 16:15 | 2339222 LFMayor
LFMayor's picture

LOL, now we get to watch these fucking socialists starve.  Congratulations on your victory, socialist tools and useful idiots, now reap your just reward.

Thu, 04/12/2012 - 16:21 | 2339244 LFMayor
LFMayor's picture

what's the matter, bolsheviks?  Truth fucking hurt?

And for everyone, do you really think your pension and/or 401k are not going to follow right down the drain too?

which canoe will be first over the waterfall?  Euro, CA muni, Pensions, IL muni, China?

Or does it really matter, since once the first goes, all go.


Thu, 04/12/2012 - 17:03 | 2339395 GeorgeHayduke
GeorgeHayduke's picture

Was the bolshevik's money invested in capitalist stocks, bonds and other schemes? All those bolsheviks trusted their retirement money to financial capitalist and got screwed. So we have the "socialists" wanting a free handout because they work for a living and we have their capitalist counterparts wanting a free handout for coming up with a better Ponzi scheme to steal their money. You act as though some "financial" firm wasn't scrambling to create this thing in the beginning and then land this so-called Communist contract.

You guys need to move beyond obsolete Cold War concepts and mentality to catch up with reality. I know, I know, it's easier to remain obsolete than to start thinking.

Thu, 04/12/2012 - 17:40 | 2339540 Stoploss
Stoploss's picture

You need all the help you can get.

It's on me.

Thu, 04/12/2012 - 18:26 | 2339676 GeorgeHayduke
GeorgeHayduke's picture

Tell you what, I've spent quite a bit of time in the offices of State reps and senators and Federal reps and senators on several occasions. In real life, not on Wikipedia, talk radio and in other theoretical manners as they blather endlessly about in these message boards. I have experienced enough to know that very little happens in any government at any level without the connected folks (usually business leaders and other prominent folks in the community) getting their cut and or things going their way. It doesn't happen by accident.

So live in your fantasy world where hippie environmentalists, Marxists and socialists somehow have more influence over the laws of the land than oil company executives and bankers who golf with the president and congress. You guys need to check out the real world and quit reading about it on websites that echo what you want to hear.

Thu, 04/12/2012 - 19:05 | 2339809 LFMayor
LFMayor's picture

Gee, thanks for the tip, Pa!  Can I have 150 bucks, I got a girl in trouble?

Sounds like you might actually be part of the problem, oh Annointed Palm Pumper of Politicians and other Greate Peoplfs.

Those connected folks of yours still pander to votes, to make things seem "fair".  So they're culpable.  And things just happen to be headed straight for shit, don't they?

Thu, 04/12/2012 - 20:27 | 2340033 GeorgeHayduke
GeorgeHayduke's picture

Naw, not part of the problem. I was pushing environmental issues around sustainable living at the time. I never paid any of them a dime. I was an outsider then and even more of one now. Believe me, none of my friends fit into the "influenctial" category. I didn't last long at that job...or most others for that matter. It was a nice life lesson though.

So, your image is incorrect. Nice try at a shot though...keep might land one.

Thu, 04/12/2012 - 19:18 | 2339855 Bobbyrib
Bobbyrib's picture

401K money is taken directly out of my paycheck and is currently not held by the government. There is a difference. As long as the dollar holds some value and the government doesn't seize 401K's, we'll be a lot less screwed than teachers in California.

Thu, 04/12/2012 - 16:17 | 2339235 ReallySparky
ReallySparky's picture

California is not the only one.  IL pension funds are seriously short as well.  Very short of funds.

Fri, 04/13/2012 - 12:44 | 2342037 Freddie
Freddie's picture

CA is a nightmare but Illinois is probably exponentially worse than CA.   the state taxpayers will bail it out.

Thu, 04/12/2012 - 16:18 | 2339236 catacl1sm
catacl1sm's picture

Well, it sounded like a good idea, at the time. /sarc

Thu, 04/12/2012 - 16:19 | 2339243 krispkritter
krispkritter's picture

The teachers will be picketing and rioting in the streets! (but at least all the signs will be spelled correctly and the grammar will be impeccable)

Thu, 04/12/2012 - 18:09 | 2339632 Its_the_economy...
Its_the_economy_stupid's picture

Y' think?

Thu, 04/12/2012 - 16:19 | 2339246 midgetrannyporn
midgetrannyporn's picture

It will be funny watching them try to get their money back out of the market. And, it's gone. LMAO

Thu, 04/12/2012 - 16:20 | 2339251 RafterManFMJ
RafterManFMJ's picture

Eat a bag of dicks, teechers.  For your part in brainwashing the American Masses, and for turning out an increasingly illiterate and inept product while boosting your own pay and benefits - your payment will be a lifetime of eating catfood and hiding from feral gangs of wilding illegal im'grants.


Thu, 04/12/2012 - 16:24 | 2339265 LFMayor
LFMayor's picture

yes!  a fitting reward for taking dodge ball out of school, too.

Thu, 04/12/2012 - 18:05 | 2339618 Tsunami Wave
Tsunami Wave's picture

Fuck [most] public school teaching retards.. it's no wonder former sorority sisters and other dumbasses that can't make it in anything else go into this.

Thu, 04/12/2012 - 16:23 | 2339262 Clayton Bigsby
Clayton Bigsby's picture

Good luck CA taxpayers.  Not only do you have one of the shittiest public education systems in the country - you're about to have to pay more for it...

Thu, 04/12/2012 - 16:30 | 2339276 Boxed Merlot
Boxed Merlot's picture

How is it the socialist government pension funds are mandated to invest in the private sector and do not participate in the private sectors government run social security program?

Suits me fine that they now face the same future private sector folks are facing in unfunded future SS benefits.

Life in the rabbit hole.

Thu, 04/12/2012 - 16:30 | 2339282 realitybiter
realitybiter's picture

When will the new teachers despise the old, retired, "I spiked my retirement, you can't" teachers?  

When will someone sharpen their pencil and conclude, using 4th grade math, "This NEVER computed, therefore we were either knowingly fraudulent or negligently fraudulent.

Clawbacks on the fraud?

I like that Ray Dalio paid himself $4B, while his LP's Lots of pension funds got $14B.

How much stupid risk will the pension funds take to make the hail Mary return?

When will someone say, "geez, if we had only put 10% in Gold in 2001 we would be $30B overfunded today"?

(I'm sure if they had done this the morons on the board would have come up with full salary retirement after 15 years, screwing that pooch, too.)


And the final question should be, given we have just experienced outsized returns and our unfunded liability is growing, how bad is it going to be when this thing corrects?

Thu, 04/12/2012 - 16:32 | 2339290 dick cheneys ghost
dick cheneys ghost's picture

"According to the GAO team, “We calculated that closing the fiscal gap would require action to be taken today and maintained for each year (through 2060) equivalent to a 12.7 percent reduction in state and local government current expenditures. Closing the fiscal gap through revenue increases would require action on that side of a similar magnitude.”"


we are so screwed.........

Thu, 04/12/2012 - 16:33 | 2339292 Born-Again Bankster
Born-Again Bankster's picture

This is irrelevant.  As the dollar loses value, inflation will soar, the Dow will be at 17,000 and these will be fully funded.  Problem being that gas will cost $12/gallon and those pension checks won't be able to help pay for shit.  Nothing like working your whole life to be conned and laughed at by TPTB.  I'm sure there's a clause in those pensions that allows for "uncontrollable economic conditions".  Poor bastards.   

Thu, 04/12/2012 - 17:35 | 2339524 Seasmoke
Seasmoke's picture

that sounds great but i still rather have $75,000 of those worthless pension dollars than $18,000 of those worthless SS dollars

Thu, 04/12/2012 - 16:37 | 2339300 realitybiter
realitybiter's picture

I chuckle every time these teachers pensions refer to taxpayers as "employer".  Employer contribution.  We taxpayers get all the benefits of being the employer, excepting everything  but payroll.  joke.  If taxpayers were the employer there would be a massive right-sizing of employees,  benefits, and pay.  Call us what we are, slaves to the teachers union.

Thu, 04/12/2012 - 16:48 | 2339350 GeezerGeek
GeezerGeek's picture

Using "The New Math", the calculations show that the pension system is actually 5187% overfunded. End of problem.

Thu, 04/12/2012 - 20:03 | 2339975 lotsoffun
lotsoffun's picture

seasonal adjustment, the life death cycle.


Thu, 04/12/2012 - 16:50 | 2339351 gaoptimize
gaoptimize's picture

In the slow motion economic train wreck, this is a major piece of equipment that broke off in 2008, hurtling towrds the point of impact with reality.  These people will be destitute in their dotage unless they INDIVIDUALLY take their financial futures into their own hads very soon.  Because there is no advocate on their side that can chage the trajectory in the current and furture economic environment.

It would be so awesome to have CalSTRS wake up to this reality and become the single largest holder of gold bullion.  That would start the PM end game off in style. 

Thu, 04/12/2012 - 16:50 | 2339353 Dingleberry
Dingleberry's picture

Teachers have become zookeepers. The little feral childrens running wild, teaching kids that it's ok for johnny to have 2 mommies (or daddies) massacres, lockdowns and fucking like rabbits......drugs n' shit.....dealing with asswipe ghetto or absent parents.....illegals......why would anyone want to do that job? In Cali to boot?  They would have been better off (and better paid) working as prison guards. It's about the same thing. I haven't heard if their pensions are in danger.

Thu, 04/12/2012 - 16:52 | 2339367 i love cholas
i love cholas's picture

F-off and your shithole town you come from you prick. Spew your hate somewhere else

Thu, 04/12/2012 - 17:03 | 2339402 Dingleberry
Dingleberry's picture

truth hurt? ever been to LA? drop by a local high school. just don't wear a wrong color by accident. Wouldn't want to see a fellow ZHer get capped. 

Thu, 04/12/2012 - 17:07 | 2339419 i love cholas
i love cholas's picture

It's not about colors anymore you asshat.

Thu, 04/12/2012 - 19:32 | 2339903 Dingleberry
Dingleberry's picture

I guess you would what is it about now, Cholo?  Bling? Grills? Tatts? What??????

Thu, 04/12/2012 - 18:56 | 2339766 fiftybagger
fiftybagger's picture

i love cholas

Why don't you go crawl back under whatever ghetto rock you crawled out from?

Thu, 04/12/2012 - 17:06 | 2339411 SokPOTUS
SokPOTUS's picture

...and safer.

Thu, 04/12/2012 - 16:51 | 2339360 debtor of last ...
debtor of last resort's picture

We will just have to wait untill fiat money retires. That's where value comes in.

Thu, 04/12/2012 - 16:53 | 2339366 pashley1411
pashley1411's picture

Amazing hos solvable this is, if action were taken now.    Not painless, by any means, but doable. 

"What's needed now in the pension reform discussion is a long-term funding plan that only the Legislature and Governor have the authority to implement."     Other than laughing hysterical, lets pause a moment and point out how a person of fiduciary responsibility for the retirement fund of hundreds of thousands doesn't have the balls to stand up, like the Treasurer of Illinois, and speak clearly and responsibility, and say that unless the teacher intends to die before 2045, ithey'll spend their last days sleeping on cardboard by a creek.

Thu, 04/12/2012 - 17:06 | 2339410 Elmer Fudd
Elmer Fudd's picture

Lets get this over with, lets inflate the stock market, and pay everyone their damm pensions.  At lest notionally.

Thu, 04/12/2012 - 17:08 | 2339420 Rearranging Dec...
Rearranging Deckchairs's picture

Anyone know if the CALSTRS is ultimately covered by the Pension Benefit Guaranty Corporation? If not what exactly happens if the "long term" problems aren't addressed properly by the legislature and governor on that ultimate day when there is only $.69 on the dollar to meet out "obligations"? Is the state required under current law to make up for the short fall from its general fund?


I know that a State, though insolvent, cannot currently file for Bankruptcy under the U.S.  Bankruptcy Code. And supposedly the California State Constitution forbids bankruptcy as well.


I know ultimately its a huge political issue but just to understand the discussion I would like to know what the default is if nothing is done.


Thu, 04/12/2012 - 21:18 | 2340157 Dingleberry
Dingleberry's picture

no prob....they just issue IOUs again. I'm not sure how they will spend them, though.

Fri, 04/13/2012 - 00:40 | 2340722 Sandmann
Sandmann's picture

Most private defined benefit plans are protected by federal insurance provided through the Pension Benefit Guaranty Corporation (PBGC). However, CalPERs and CalSTRS are privately insured.



So if they are PRIVATELY Insured the Taxpayer will meet the Bill since AIG will simply have a fainting spell and the US Treasury will have Geithner Bailout Funds.


PS. Is it true Geithner's PR sidekick just got appointed at Goldman ?

Thu, 04/12/2012 - 17:11 | 2339433 MrBoompi
MrBoompi's picture

If you have a lot of money where do you put it?  In the bank?  LMFAO

How about putting some  of it in IPO stocks?  You know, the ones who can lie on their prospectuses?

How about letting Goldman or JP Morgan have a crack at it?  They work for free and never fleece a client right?

Thu, 04/12/2012 - 19:30 | 2339890 Bobbyrib
Bobbyrib's picture

Buy farm land and rentals.

Thu, 04/12/2012 - 17:17 | 2339452 Sudden Debt
Sudden Debt's picture

Pink slime.... A lifestyle.... For teachers...

Thu, 04/12/2012 - 17:28 | 2339495 Gromit
Gromit's picture

Look this is nothing new. Maybe here pensions have always been money good, but not in other countries.

The only honorable way to deal with 69% funding is to immediately cut back benefits to 69%. Now.

Thu, 04/12/2012 - 17:53 | 2339585 Catullus
Catullus's picture

Oh... You need a 35% return the year after a 26% loss to get back to even. Oops.

Thu, 04/12/2012 - 17:57 | 2339601 pcrs
pcrs's picture

All invested in their supreme commander in chief Obomber's advice Solyndra

Thu, 04/12/2012 - 18:01 | 2339609 Ratscam
Ratscam's picture

I tell you what they want. They want more for themselves and less for you and now they are coming for your pension money." Gerorge Carlin back 10 years ago

Thu, 04/12/2012 - 18:09 | 2339631 reTARD
reTARD's picture

LOL, well isn't this well deserved.

State and local governments cannot blame the misallocation of resources and wasting money on special interests such as the military industrial complex (attacking foreign countries for "democracy"). They only have themselves to blame. They have spent too much on their own salaries and promised too much with their benefits and pensions. They simply do not live in reality. They deserve their fake retirement.

Thu, 04/12/2012 - 18:12 | 2339643 I am a Man I am...
I am a Man I am Forty's picture

Pension funds letting wall street manage their money.  Can not believe Blackrock and Goldman not getting the job done for them.

Thu, 04/12/2012 - 22:22 | 2340348 Boxed Merlot
Boxed Merlot's picture

Pension funds letting wall street manage their money...


But have you seen the kind of arm twisting these government union fund managers bring to the table of some of these firms?  They think that just because their money originated from socialists that their dictates in the free market will actually improve productivity. 

Of course this will end badly.


Social security wouldn't be in as bad condition if these funds were kept at the government side of the ledger, but they've exempted themselves from the system free market folks retire into.


Thu, 04/12/2012 - 18:22 | 2339666 Its_the_economy...
Its_the_economy_stupid's picture

fear not.

The state and federal pension plans have already started the PR machinery. The NY Times has fired the first shot in an article stating that private 401 K's may soon be off loaded to "professionals" who manage (bankrupt) state and federal pension plans. It seems the push for liquidity is attacking the the pools of cash whose "owners" have little or no say in its allocation.

Think your private 401K is safe...think again.

Thu, 04/12/2012 - 19:33 | 2339907 Bobbyrib
Bobbyrib's picture

Stealing 401K's from your average citizen will be the last straw if the government is dumb enough to do it.

Fri, 04/13/2012 - 00:36 | 2340710 Sandmann
Sandmann's picture

Should be really easy - simply change the fund manager and most dolts won't notice

Thu, 04/12/2012 - 18:38 | 2339709 Let The Wurlitz...
Let The Wurlitzer Play's picture

It is good to see that the teachers will get the retirement income they deserve.  Karma is a bitch.

Thu, 04/12/2012 - 18:39 | 2339712 The Proletariat
The Proletariat's picture

I like muppets

Thu, 04/12/2012 - 19:03 | 2339769 Bicycle Repairman
Bicycle Repairman's picture

Pensions are all about return on assets.  No amount of extra funding or benefit cuts or stalling retirement dates can hack it.  These pension plans have an assumed ROA of 8%.  Forget about it.  The FED will have to print the money and hand it to them or they're toast.

Thu, 04/12/2012 - 18:57 | 2339773 JLee2027
JLee2027's picture

Some other generations problem?  No, it's our generation.  I'm telling you these idiots running things are risking mobs in the streets hunting and executing those responsible when it all comes burning down.  Guns, ammo, food, and Gold/Silver to prepare for what's ahead.  


Thu, 04/12/2012 - 19:01 | 2339788 reTARD
reTARD's picture

Also never buy or vote for state and municipal bonds because you would only be encouraging their spending habits with what are in effect loans from the future. Bonds are only a way for those in the current to spend more than they currently have while forcing their children to pay the cost (with interest) in the future via taxes.

Thu, 04/12/2012 - 19:00 | 2339789 non_anon
non_anon's picture

another ponzi blowing up

Thu, 04/12/2012 - 19:07 | 2339822 Bobbyrib
Bobbyrib's picture

I grew up in NJ and I think we are more underfunded than California. I demand a recount!

Fri, 04/13/2012 - 00:35 | 2340708 Sandmann
Sandmann's picture

So which Private Equity Funds and Hedge Funds helped them to this glittering success ?

It has taken a lot of QE to reduce those losses in 2008 and 2009  but 15% in Private Equity and 18% in FIxed Income must make for an ongoing bloodbath

Fri, 04/13/2012 - 05:00 | 2340928 Peter Pan
Peter Pan's picture

It would be a welcome improvement to see teachers' pensions tied to a percentage of their students' earnings once they enter the workforce. It will require a bit of tracking, but it's the only way to insure a bit of responsibility on the teachers behalf.

Likewise, parents' taxes would be lowered where their children perform well and likewise be increased when their little darlings vandalise, shoot someone or simply don't turn up to school.

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