• BREAKING NEWS ABC shows live and on-demand -- Download the WATCH ABC app!

Gov. employee retirement takes a dive

October 23, 2008 12:00:00 AM PDT
Big losses on Wall Street have struck a devastating blow to California's Public Employee Retirement System. Now, taxpayers may have to face the consequences.The California Public Employees' Retirement System (CalPERS) is the nation's largest public pension fund. On Thursday, it warned local and state entities it may need a taxpayer bailout to continue paying retirees.

With stock market losses topping $50 billion since July 1, CalPERS is on track to require help in just two years, if the nose dive continues on Wall Street.

Local government and state retirees are guaranteed a certain amount, so the money has to exist.

"What this really is, is compensation. It's part of an employee's compensation package," said CalPERS Assistant Executive Officer Pat Macht.

Taxpayer groups are upset that Californians have to foot the bill when many employers have moved away from pension plans.

"This is adding insult to injury. At the same time we're seeing our own 401(k)s get hit, we're on the hook to make up the shortfalls for public employees who are guaranteed their full pensions without any risk," said Jon Coupal, Howard Jarvis Taxpayers Association.

Cities and counties also use CalPERS. Many can barely afford to keep services going, let alone contribute more to retiree benefits.

Pension costs can hurt a public agency's budget. They led to a big scandal in San Diego and helped push the city of Vallejo into bankruptcy.

Just this week, the Los Angeles Board of Supervisors learned market losses could force the county to pay an extra $500 million into its pension fund.

Lin Brady, who has been a prison guard for nearly 30 years, just signed up for pension benefits at CalPERS.

"I think the obligation is there, that they need to make sure our pensions are supported," said Brady.

The only way out of this is for the stock market to perform better.


- Get more L.A. breaking news, weather, traffic and sports
- Have a news tip? Send your tips, video, or pictures


Load Comments