CalPERS

The California Public Employees' Retirement System, branded as CalPERS, is an agency in the California executive branch that "manages pension and health benefits for more than 1.5 million California public employees, retirees, and their families".CalPERS. Facts at a glance: general. January 2009. Retrieved December 24, 2008. In fiscal year 2020–21, CalPERS paid over $27.4 billion in retirement benefits,CalPERS. Facts at a Glance - Public Employees' Retirement Fund (PERF), 2020-21 CalPERS. 2021. Retrieved October 9, 2021. and over $9.74 billion in health benefits.CalPERS. Facts at a Glance - Health Benefits, 2019-20 CalPERS. 2021. Retrieved October 9, 2021.

CalPERS manages the largest public pension fund in the United States, with more than $469 billion in assets under management as of June 30, 2021. CalPERS is known for its shareholder activism; stocks placed on its "Focus List" may perform better than other stocks, which has given rise to the term "CalPERS effect".Sidel, Robin. "Calpers effect" may give lift to underperforming stocks. The Wall Street Journal, April 20, 2004. Outside the U.S., CalPERS has been called "a recognized global leader in the investment industry",Republic of the Philippines, Office of the Press Secretary. PGMA welcomes CalPERS upgrade of RP investment rating. February 3, 2006. Retrieved December 26, 2008. and "one of America's most powerful shareholder bodies".Griffiths, Katherine. Calpers calls for heads to roll at Citigroup over allegations of poor corporate governance. April 14, 2004. Retrieved December 26, 2008.

As of 2018, the agency has $360 billion in assets, and is underfunded by an estimated $150 billion, with current assets below 70% of necessary to provide for liabilities. In an effort to reduce this shortfall, at the end of 2016 the board lowered their expected annual rate of return on investments from 7.5% to 7.0%, increasing the costs California cities must pay toward their workers' pensions.

Statistics on pension payouts, 2018

Total payout = $22 billion Total beneficiaries = 600,000 Overall average = $32,224 - (including payments to survivors and workers with only a few years of service) 20+ years of service average = $50,333 30+ years of service average = $66,373 Police or Firefighters with 20+ years of service average = $78,104 Number of retirees with $100,000+ pension = 26,000 (This is 4% of the total number of retirees, yet this group collected 17% of the total amount CalPERS paid out in 2018.)

For comparison: Average Social Security payout = $17,532

History Discussion about providing for the retirement of California state employees began in 1921, but only in 1930 did California voters approve an amendment to the State Constitution to allow pensions to be paid to state workers, and only in 1931 was state law passed to establish a state worker retirement plan.Dedication. Vision. Heart. The CalPERS story. Chantilly, VA: History Factory, 2007. . In 1932, the "State Employees' Retirement System" (SERS) began operation.Pichardo, Raquel. Pensions & Investments, May 14, 2007. Retrieved October 30, 2008. The California State Employees Association, established in 1931, began a close relationship with SERS that continues to this day.

In 1939, the state Legislature passed a bill that allowed local public agencies (such as cities, counties, and school districts) to participate in SERS. Initially, SERS could invest only in bonds, but in 1953 a new state law allowed SERS to invest in real estate. SERS then built a , 16-story building in Sacramento which opened in 1965; part of the building housed SERS employees, and part of the building was leased to other state agencies.

The "first major new benefit for SERS members," health insurance, began in 1962 with the passage of a law that was later amended to become the "Public Employees' Medical and Hospital Care Act". Because by 1967 SERS was contracting with 585 local public agencies for retirement benefits, its name was changed to the "Public Employees' Retirement System" (PERS). With the passage of a ballot proposition and a state law in 1966–1967, PERS was allowed to invest 25% of its portfolio in stocks; in 1984, Proposition 21 removed the 25% limitation.

State Treasurer Jesse M. Unruh was a PERS Board member in the mid-1980s. He began PERS' emphasis on corporate governance; in addition, he was instrumental in creating the Council of Institutional Investors, an organization of pension funds and other institutions that opposed "greenmail and other corporate practices that benefited only management".

In 1986, the headquarters building of PERS, now called "Lincoln Plaza North", was completed in Sacramento at a cost of $81 million.CalPERS. Lincoln Plaza North building. May 2, 2007. Retrieved November 3, 2008. The building, which has , is known for its six-story-high atrium and landscaped terraces.

Governor Pete Wilson In 1990, fund value reached $49.8 billion. In July 1991, Governor Pete Wilson addressed the state's $14.3 billion budget deficit by removing $1.6 billion from the pension fund. Wilson further sought to give the governor's office control of the PERS’ actuarial projections and the appointment of a majority of its board of directors. Public employee unions responded by seeking an amendment to the Constitution of California that would guarantee the board's independence, remove the fund's duty to minimize contributions or administrative costs, and require the provision of benefits to "take precedence over any other duty". The initiative, known as Proposition 162, passed by a single percent at the November California elections, 1992. Proposition 162, also known as the "California Pension Protection Act of 1992," gave the PERS board "the sole and exclusive fiduciary responsibility over the assets of" PERS.Proposition #162. People's Advocate. Retrieved December 24, 2008.

To avoid confusion with public employees' retirement systems in other states, the organization's name was changed to "CalPERS" in 1992. By 1996, the CalPERS portfolio was worth $100 billion, and the number of members exceeded 1 million.

Governor Gray Davis In 1999, fund value reached $159.1 billion, requiring $159 million in state tax dollar contributions. In 1999, the CalPERS board proposed a benefits expansion that would allow public employees to retire at age 55 and collect more than half their highest salary for life. CalPERS predicted the benefits would require no increase in the State's contributions by projecting an average annual return of 8.25% over the next decade. When Board member Phil Angelides’ aide questioned whether the stock market could grow that long, Board Chairman William Crist, a former union president, replied that they "could make all sorts of different assumptions and make predictions, but that’s really more than I think we can expect our staff to do". CalPERS' chief actuary, objected, finding that it would be "fairly catastrophic" if the fund only grew at 4.4%.

The benefits expansion bill, SB 400, passed with unanimous backing by California State Assembly Democrats and was signed into law by Governor Gray Davis. CalPERS then produced a video promoting the legislation with Chairman Crist promising greater benefits "without imposing any additional cost on the taxpayers" and the California State Employees Association president praising it as "the biggest thing since sliced bread".

The next year the dot-com bubble burst, and CalPERS did not grow, instead losing value in the stock market downturn of 2002. In 2001–2002, CalPERS provided technical assistance for the Sarbanes-Oxley Act because it had sustained financial losses from the Enron and WorldCom bankruptcies. After the Great Recession, in 2009 CalPERS investments lost 24%, dropping $67 billion in value. Chairman Crist retired from the board and it was later revealed he had accepted more than $800,000 from a firm to ensure hundreds of millions of investment from CalPERS.

In November 2005, CalPERS expanded its headquarters with the "Lincoln Plaza East & West" buildings which cost $265 million.CalPERS. Lincoln Plaza East & West. June 27, 2008. Retrieved November 3, 2008.Vellinga, Mary Lynne. CalPERS' new look - It opens a downtown headquarters that's light, airy and innovative. Sacramento Bee, November 12, 2005. The architecture of the buildings, which received praise, includes an entry tower high in a shape reminiscent of a tree which is made of steel covered with glass. The project was awarded a Gold Leadership in Energy and Environmental Design (LEED) rating.Boehland, Jessica. Close to home: A headquarters consolidation more than fills its predecessor’s big shoes. GreenSource Magazine, vol. 2, no. 2, April 2007, pages 78-83. Retrieved November 6, 2008.

Governor Jerry Brown In 2012, Governor Jerry Brown signed legislation that reduced benefits for all new state employees and sought to combat pension spiking. Legislators rejected Governor Brown's proposals to include a 401(k) type defined contribution plan and to require CalPERS Board members to be independent, not themselves pensioners. Governor Brown promoted the reform as the "biggest rollback to public pension benefits in the history of California", but it only resulted in a 1% to 5% reduction in contribution increases. Total savings from the reform are estimated to be $28 to $38 billion.

In the fall of 2014, CalPERS named Ted Eliopoulos as chief investment officer. He won the #2 ranking in the Public Investor 100 for 2016. Blackstone Group LP announced in November 2015 that it would acquire 43 international and domestic real estate funds from CalPERS for $3 billion.

In 2015, Kevin de León, who was the California State Senate majority leader at the time, introduced legislation to require CalPERS and CalSTRS divest from coal and the California Democratic Party passed a resolution in support of fossil fuel divestment. The bill was passed and, effective June 1, 2017, CalPERS was prohibited from maintaining holdings in companies that receive at least half of their revenue from thermal coal.

In 2016, CalPERS fund value reached $295.1 billion. State tax dollar contributions have had to increase to $45 billion, a 3,000% increase from before the 1999 benefits expansion. Promised benefits exceeded funds available by $241.3 billion. Unfunded retiree healthcare costs add an additional $125 billion to California's public retirement debt.

Governor Gavin Newsom During Gavin Newsom's tenure, activists have increasingly called for CalPERS to more broadly divest from fossil fuels. On February 17, 2022, State Senator Lena Gonzalez introduced legislation that would require CalPERS and CalSTRS divest. The CalPERS board has opposed proposals to divest. The bill passed the state senate on May 25 but was halted in the assembly by Jim Cooper.

Governance

Law The legal authority for the activities of CalPERS can be found in the constitution, laws, and regulations of the state of California, including: California Constitution, Article XVI, Section 17, under which (as amended by Proposition 162) "the retirement board of a public pension or retirement system shall have plenary authority and fiduciary responsibility for investment of moneys and administration of the system".Michie's Legal Resources. 2009 California public employees' retirement law. Constitution of the state of California. Article XVI public finance. Retrieved December 24, 2008. California Government Code, Title 2, Division 5, Parts 3-8 (i.e., Sections 20000–22970.89).CalPERS. The California public employees' retirement law. Retrieved December 24, 2008. Among other parts, Part 3 covers the administration of the retirement system including membership, contributions, and benefits; and Part 5 covers the Public Employees' Medical and Hospital Care Act on health benefits.Legislative Counsel of California. California Government Code. Retrieved December 24, 2008.