A tiny little pension fund in California illustrates a gigantic problem for public pensions. From Mary Williams Walsh at nytimes.com:
When one of the tiniest pension funds imaginable — for Citrus Pest Control District No. 2, serving just six people in California — decided last year to convert itself to a 401(k) plan, it seemed like a no-brainer.
After all, the little fund held far more money than it needed, according to its official numbers from California’s renowned public pension system, Calpers.
Except it really didn’t.
In fact, it was significantly underfunded. Suddenly Calpers began demanding a payment of more than half a million dollars.
“My board was somewhat shocked,” said Larry Houser, the general manager of the pest control district, whose workers tame the bugs and blights that threaten their corner of California citrus country. It is just a few miles down the road from Joshua Tree National Park.
It turns out that Calpers, which managed the little pension plan, keeps two sets of books: the officially stated numbers, and another set that reflects the “market value” of the pensions that people have earned. The second number is not publicly disclosed. And it typically paints a much more troubling picture, according to people who follow the money.
But more important, it raises serious concerns that governments nationwide do not know the true condition of the pension funds they are responsible for. That exposes millions of people, including retired public workers, local taxpayers and municipal bond buyers — who are often retirees themselves — to risks they have no way of knowing about.
To continue reading: A Sour Surprise for Public Pensions: Two Sets of Books