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State public pension funds earn return of over 18 percent

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POSTED July 14, 2014 7:52 p.m.

SACRAMENTO (AP) — Two of the nation’s largest public pension funds on Monday reported investment returns of more than 18 percent for the fiscal year.

The California Public Employees Retirement System had earnings of 18.4 percent for the fiscal year that ended June 30, while the California State Teachers Retirement System had a return of nearly 18.7 percent, The Sacramento Bee reported.

The funds, which pay the retirement and health care benefits of public employees, had both forecast investment returns of 7.5 percent for the fiscal year.

Despite the soaring returns, both funds are still recovering from multibillion-dollar losses at the height of the recession and have massive liabilities.

In January, the state Department of Finance estimated almost $218 billion in unfunded pension and retiree health care liabilities for CalPERS, CalSTRS, the University of California system and judges. That’s the shortage the funds need to cover so they are able to fully pay all their promised financial commitments to retirees.

Gov. Jerry Brown signed legislation last month creating a long-term plan to pay down unfunded liabilities in the teacher pension system, estimated to be between $74 billion and $80 billion.

The legislation requires higher contributions to the fund from the state, school districts and teachers over time in an effort to eliminate the unfunded liability by 2046. Contributions eventually will rise to $5 billion a year.

Earlier this year, CalPERS also approved the first in a series of rate increases to reflect longer life expectancies for retirees.

“There’s much, much work to be done,” Ted Eliopoulos, CalPERS’ interim chief investment officer, told reporters in a conference call. “We’re ever vigilant. We try not to get too excited in good years or bad years about one-year results.”

CalPERS’ portfolio is now $299.4 billion, while CalSTRS’ is estimated at $189.1 billion.

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