SACRAMENTO, Calif. — As its investment portfolio was losing nearly a quarter of its value, the country’s largest public pension fund doled out six-figure bonuses and substantial raises to its top employees, an analysis by The Associated Press has found.
Board member Tony Olivera said the California Public Employees’ Retirement System tried to reduce the bonuses but was under contractual obligations to pay them.
Calpers’ plunging value came as stock values tumbled around the world, the state’s economy suffered its worst decline in decades and basic state services faced severe cuts.
Virtually all of Calpers’ investment managers were awarded bonuses of more than $10,000 each, with several earning bonuses of more than $100,000 during the 2008-09 fiscal year. The cash awards were distributed as the fund lost $59 billion.
Steve Deutsch, director of pensions and endowment at Morningstar Inc., said many public pension plans award performance bonuses and called Calpers’ performance during 2008-09 “middle of the road.”
“It’s absolutely very widespread but very low-profile in terms of being acknowledged, discussed or disclosed by the plans,” Deutsch said.
Calpers spokesman Brad Pacheco said bonuses are based on the fund’s performance over five years, not just the year immediately preceding the bonus, in order to encourage managers to seek long-term investments rather than short-term gains. He said bonuses in the 2008-09 fiscal year were 50 percent lower than in 2006- 07 and that the market declines will continue to dampen bonuses in future years.
