CalPERS adds $12 billion to California economy, study says

Reporting from Sacramento —  The California Public Employees’ Retirement System pumped nearly $12 billion into the state’s economy last year through benefits paid to retirees and other beneficiaries, making it “a significant economic engine in most California communities,” a new study says.

The findings of consultant Robert Fountain, a retired Cal State Sacramento economics professor, help to show how important the country’s largest public pension is to the state’s economy, fund officials said.

CalPERS, which released the study Monday, has been engaged in an ongoing public relations campaign to improve an image that has been battered by investment losses and corruption scandals.

The investment losses have fueled widespread criticism that CalPERS, which covers 1.6 million active and retired public employees and their families, does not have the financial wherewithal to meet future public pension obligations without increasing demands on the public treasury and, ultimately, taxpayers.

CalPERS’ payments to 431,000 retirees and beneficiaries living in California stimulated about $26 billion in total economic activity last year as the benefits were re-spent in the chain of commerce. That multiplier effect supported almost 94,000 jobs, Fountain said.

“As we continue to discuss public pensions, let’s remember that our California retirement checks are a financial necessity and a vital source of economic strength for many people and communities around the state,” said CalPERS Chief Executive Anne Stausboll.

CalPERS critics don’t dispute that benefit payments, averaging about $2,200 a month for each retiree, boost the economy.

“The only problem is the taxpayers are on the hook for the billions of dollars that CalPERS lost in recent years,” said Dan Pellissier, president of Californians for Pension Reform, a group aiming to put a pension overhaul initiative on the November 2012 ballot.

According to the study, 64% of every dollar spent by a CalPERS retiree is generated by gains from CalPERS’ $237-billion investment portfolio. The balance comes from state and local government employer contributions (21%) and from members during their working years (15%).

CalPERS investments have returned an average of 7.9% a year over the last 20 years, the study said.

Nevertheless, its portfolio suffered a $100-billion loss during the recession. Though the fund’s performance has improved, it has yet to recoup all those losses.

To ease possible future burdens on taxpayers, Pellissier and his initiative campaign said they are drafting a proposed law to cap contributions by state and local government employers to 6% of each worker’s annual salary.

Pellissier called the 6% limit in line with private-sector contributions. Public safety workers, such as police and fire personnel, would be capped at 9% because they generally have shorter careers, Pellissier said.

marc.lifsher@latimes.com