The sharp decline in financial markets will likely result in a huge setback to government-employee pension funds, which never fully recovered from the last recession. Though the accounting of these systems is more complex than ordinary municipal budgets, and the implications of market drops can take time to become apparent, a picture is emerging of the costs that some of the biggest funds—like the California Public Employees’ Retirement System (CalPERS)—face. Meantime, the risks that some of our worst-funded state and city pension systems must now confront, including New Jersey’s and Chicago’s, are also becoming evident. Last week, the president of the Illinois State Senate even asked for a multibillion-dollar bailout of the state’s pension system. The failure of many pension funds to fix their funding during the last decade of market expansion will weigh heavily on taxpayers if the economy and financial markets don’t turn around rapidly.
With about $350 billion in assets—down from about $400 billion at the market’s height, earlier this year—CalPERS is the nation’s largest public-employee pension fund. It took a battering in the last recession, when its funding shrank from 87 percent of the money needed to meet future obligations in 2007 to just 68 percent a few years later. After an 11-year market expansion, though, CalPERS is barely more than 70 percent funded, as of last June. Taxpayers have paid the price. The state and its local governments funnel $15.6 billion into the fund, up from $6.4 billion in 2007.
Even with the changes, UW Health expects to lose $100-200 million in the fiscal year ending June 30, CEO Dr. Alan Kaplan said in a message to employees.
“No one is responsible for the coronavirus,” UW Health in its statement. “But it is here and we must deal with the financial reality of responding to it.”
At SSM Health, revenues in Wisconsin “are down significantly since the start of this pandemic,” Sveum said. “While we are receiving some financial assistance from federal and state stimulus packages and disaster programs, in many cases these assistance funds are significantly less than the losses we have faced and will continue to face.”
Iowa-based UnityPoint Health said in a statement its hospitals and clinics “are facing unprecedented challenges and volume declines as a result of the global pandemic.”