Public Pension Assets Decline Nearly 23%, Census Bureau Says

State and local government pension funds saw a nearly 23% drop in the value of their assets in 2009 as the U.S. economy struggled to get out from under the Great Recession, the Census Bureau says.

The country’s state and local public employee retirement systems posted $2.5 trillion in total cash and investment holdings in 2009, a $726.1 billion or 22.7% decline from $3.2 trillion in 2008, says the Census Bureau. This drop comes on the heels of a $176.7 billion loss the previous year, and it’s off from the 2007 peak of $2.93 trillion.

Depending on the source of the estimates and accounting methods used, state and local pension funds face a funding gap of anywhere from $1.3 trillion to $3 trillion. Taxpayer dollars, worker contributions and investment returns pay for the funds.

And pension funds’ acumen at picking smart assets doesn’t look so hot. They totted up $633.4 billion in losses on investments in 2009, the Census Bureau says. “That was nearly $600 billion more than in 2008 when losses totaled $38.9 billion,” the bureau says in a statement. Corporate stocks picks got hurt the most, dropping 29.8 % from $1.2 trillion in 2008 to $808.9 billion in 2009. Stocks made up 32.8 % of pension fund total holdings in 2009. The funds saw increases “in cash and short-term investments, real property, and mortgages, which in total comprised 9.1 % of total cash and investment holdings,” it says.

But state and local workers are slowly giving more to their pensions, thanks to pension reforms enacted in an estimated 40 states as well as in local governments since 2009 that force state and local government workers to pay more into their pension funds. Republican governors of states like Wisconsin and Ohio have reined in collective-bargaining rights of public employees over their benefits in order to protect taxpayers, as these costs soar.

The reforms also cut back on benefits too, igniting pitted battles between state and local government workers and elected officials. “Employee contributions increased 7% in 2009, to $39.5 billion,” the Census Bureau says. However, “government contributions increased 4.5% to $86.1 billion with local government contributions increasing 10%, offsetting a 2.6% decline in state government contributions,” the Bureau adds.

Standard & Poor's annual survey of state pension funds released earlier this year showed that state and local public pension plans saw a decline in their funding ratios. The funds had a mean funding ratio of 75% in 2009, a five percentage point decline from 80% in the year prior.