California's main public-employee pension fund, the nation's largest, has lost at least $18 billion off its stock portfolio since July 1, about 7.5 percent of its $237.5 billion total asset value on June 30.
Florida's pension fund has lost about $9 billion since June 30, a decline of 7 percent for a fund valued at $119.4 billion on Thursday, while the Virginia Retirement System shrank from $54.5 billion on June 30 to about $51 billion by week's end, a decline of 6.4 percent.
New York's state comptroller will not say how much the state pension fund has lost during the latest Wall Street roller coaster, but the fund was 5 percent below its pre-recession value before the recent losses and remained nearly $8 billion below its pre-recession value.
And Kentucky, which has more than $20 billion in unfunded pension liabilities, has seen the value of its public pension fund decline $1.7 billion — or 15 percent — since July 1, falling to a total value of $9.7 billion.
Nationwide, states have a combined $689.5 billion in unfunded pension liabilities and $418 billion in government retiree health care obligations, according to data collected earlier this year by The Associated Press. Those benefits are protected by state law or, as in New York, by the constitution.
Pension fund managers say there is no risk current government retirees will miss a monthly check and that they are remaining calm and taking the long view in their investments. Some say the market plunge is even providing a great opportunity to buy stocks at fire-sale prices.
Kentucky Retirement Systems Chief Investor T.J. Carlson said his fund has not made significant changes to its investments in response to the market turmoil.
"We haven't changed our long-term strategy in any way," he said.
Critics of the defined benefit plans, which guarantee pensions for life to public employees and are rarely found any longer in the private sector, say the recent stock market plunge underscores the need for fundamental changes.
The amount state and local governments are being forced to funnel into pension payments is rising as retirees live longer and elected officials have awarded more generous pension benefits in recent years, taking taxpayer money away from core public services.
At the same, pension funds promise returns on investments — 7 percent to 8 percent or more a year — that many critics say are unrealistic in the future.
E.J. McMahon, a senior fellow at the conservative Manhattan Institute for Policy Research, said the asset levels of virtually all public pension funds are below 2007 levels despite the recovery of the market in 2009 and 2010.
"They still think there is a 'long-term norm,'" he said of fund managers. "The events of the last two months are a reminder of how wrong that might be."
As recently as last month, California's two public pension funds reported investment gains of more than 20 percent for the fiscal year ended June 30, largely driven by rising stock values.
The increase came as both funds — one for teachers, the other for state and local government workers — were clawing their way back from losses in 2008 and 2009 that cost them up to one-third of their asset value.
The recent losses are stoking fears again that taxpayers will have to bail them out at the expense of other programs that already have been subject to deep budget cuts. The state already faces an estimated $75 billion in unfunded public pension liabilities.
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