CalPERS retirees are suddenly worried about their pensions. What happened?

March 19--Call it the Loyalton effect.

CalPERS' decision in late 2016 to slash pensions for four retirees from the tiny mountain town startled the state's public workers so much that their confidence in the $354 billion fund began to plunge to its lowest level in five years.

It showed in an annual survey conducted by the California Public Employees' Retirement System that gauges how public employees, retirees and local government leaders feel about the state's largest pension system.

"You're looking at your retirement and you're seeing CalPERS is reducing pensions, which is something that had never happened before," said CalPERS board member Richard Costigan, who has paid close attention to the surveys since he joined the board in 2010.

Each CalPERS survey captures a moment in time, and last year's results might not be repeated.

It unfolded in a dramatic window. CalPERS in November 2016 cut the Loyalton pensions because the town had not paid a CalPERS bill in three years.

In December 2016, CalPERS acknowledged that it expected to earn less money over time from its investment portfolio. That meant government agencies had to kick in more money to fund their employees' pensions.

In early 2017, CalPERS cut retirement benefits again for nearly 200 former employees of another local government organization that had stopped paying into the fund.

Costigan said each vote was meant to strengthen the pension fund, but the cumulative effect of the news sent a distressing signal.

"We are honoring our financial obligation. You can't have other people pay in the fund for these guys," he said, referring to the two organizations that saw cuts to their pension plans last year.

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The drop in confidence last year was especially pronounced among local government executives.

Their confidence in CalPERS declined by more than 10 percentage points when they were asked whether they believed their retirement money was "safe."

Almost 80 percent of respondents from 2015 gave CalPERS high marks on that question. Last year, fewer than two-thirds of them expressed that kind of confidence.

Public employees, too, appeared to be worried. About 65 percent of current employees indicated they believed their retirement money was safe, down from 83 percent in 2014.

CalPERS is considered underfunded because it has about 70 percent of the assets it would need to pay everything it owes today.

Its critics argue that it's unsustainable because of its liabilities. Supporters say it's on the mend from the recession, and it recently passed a milestone where its leaders no longer believe they have to sell assets to pay benefits.

"It's not going to go broke. It's in better shape than it was 40 years ago and probably better than it was in 2008 and 2009," said Dave Low, president of the California School Employees' Association, a union that represents classified workers in public schools.

The Bee reviewed four years of surveys conducted by CalPERS and the California State Teachers' Retirement System. Here's a look at how different participants view the two pension funds.

The boss is worried -- Senior government executives are very worried about CalPERS.

In last year's survey, a majority of them said they lacked confidence in the safety of their retirement money. They were the only group of survey participants to express that level of concern.

CalPERS surveys in 2014 and 2015 previewed those fears. CalPERS in those years hired a private firm to conduct the survey. It included a couple of questions gauging whether members worried that their employers would have enough money to pay pension obligations in the future.

In both years, survey participants indicated they were concerned that their employers might have trouble paying future pension bills.

CalPERS members "are very highly convinced that local public employers' current and future abilities to pay their pension and other obligations will affect CalPERS members, their families and their communities," the 2015 survey reported.

Retirees are content -- At both CalPERS and CalSTRS, retirees have fewer worries about pensions than current employees.

In the most recent CalPERS survey, for instance, 80 percent of pensioners felt their retirement money was "safe." Only 65 percent of current employees expressed similar confidence.

CalSTRS has a similar split. Almost 90 percent of retired teachers consistently say they're satisfied with their pension fund.

By contrast, fewer than two-thirds of teachers under age 60 express that kind of satisfaction with CalSTRS.

Retirees pay close attention to the fund and can change its direction. Last year, retirees supported Garden Grove Unified School District facilities director Margaret Brown in an election for a CalPERS seat held by union-backed Michael Bilbrey. Brown won.

Tim Behrens, president of California State Retirees, wanted new voices to speak up.

"I've been going to those board meetings for five years, and didn't see much movement from the incumbents. Margaret asked some hard questions, and that's what has to happen," he said.

Workers have questions -- CalSTRS last year saw a 5 percentage point decline in confidence when its members were asked whether they felt secure in their retirement, down to 55 percent of participants giving the fund high marks on that question.

At CalPERS, confidence in retirement safety among current public employees is down to levels the fund last saw in 2011 as it clawed out of its recession losses.

Meanwhile, Gov. Jerry Brown's office this year is challenging a legal precedent that blocks California agencies from tinkering with pensions. That lawsuit is in the news, and probably affecting how public employees view their pensions.

The high-profile pension lawsuit could allow government agencies to "truly and actually strip away members' retirements," said Derick Lennox, a lobbyist who represents school districts.

He, too, wants to change negative perceptions about the funds. "Retirements are not less secure; we're just assessing our projected assets more accurately and, unfortunately for us employers, making a commensurate correction on the employer contribution rates to improve the funded status."

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