Preliminary reports indicate the California Public Employees’ Retirement System (CalPERS) and California State Teachers’ Retirement System (CalSTRS)—the state’s two primary pension systems for public workers—underperformed their long-term investment return target in the recently completed fiscal year. While a single year of results itself is not cause for alarm, it does add to the growing signs that California’s public pensions are facing economic headwinds and should consider reducing risk for the sake of both taxpayers and the public workers who depend on the funds for their retirement.
CalPERS achieved an investment return of 6.7 percent during the latest fiscal year, and similarly, CalSTRS saw a 6.8 percent net return, both short of the 7 percent benchmark established by their managing boards. Each single year of investment returns below the assumed rate of return means that the assets did not grow as much as expected, increasing the pension plan’s unfunded liability