Jan 22, 2019; Los Angeles, California, USA; Thousands of striking teachers gather in Grand Park in downtown Los Angeles for a rally. The teachers union, United Teachers Los Angeles, reached a tentative agreement on a new contract with L.A. Unified School District. Mandatory Credit: Robert Hanashiro-USA TODAY
California’s largest public pension systems were rocked last week by the steepest stock market declines since the early COVID-19 pandemic, as new tariffs announced by President Donald Trump sent shockwaves through global financial markets and erased trillions in investor wealth.
Scott Chan, chief investment officer at the California State Teachers’ Retirement System (CalSTRS), warned just weeks earlier of “unprecedented” risks and predicted a possible 20% market drop due to escalating policy shifts and economic uncertainty from the Trump administration. His concerns quickly materialized when Trump announced sweeping tariffs against nearly every major trading partner, igniting fears of a global trade war.
The result: California’s two largest pension funds — CalSTRS and the California Public Employees’ Retirement System (CalPERS) — lost billions. CalPERS alone shed roughly $15 billion in value over two days, dropping to $516.5 billion. CalSTRS, which updates its figures monthly, is believed to have suffered similar losses.
While retired teachers, firefighters, and state workers are still guaranteed their pensions, the burden of recovering from these losses will fall on school districts and local governments, which may have to contribute more to keep the systems solvent.
“This one is not scam marketing or a bad market,” said Terry Brennand of SEIU California, referencing past crashes. “We just turned the gun on ourselves and fired it.”
California State Treasurer Fiona Ma, who sits on both pension boards, said the volatility is unlikely to affect other public investments immediately, but acknowledged widespread anxiety. “We’re going to see a lot of disruption,” Ma said.
Despite the setback, officials at both CalPERS and CalSTRS say the funds are long-term investors with diversified portfolios. However, missing annual investment return targets — 6.8% for CalPERS and 7% for CalSTRS — could worsen long-term funding shortfalls.
Stephen Gilmore, CalPERS’ chief investment officer, remained cautiously optimistic, saying market volatility could create opportunities to buy undervalued assets and strengthen the portfolio in future years.
Still, for now, the uncertainty looms. “It’s something we’re all bracing for,” said Dane Hutchings of the California Public Policy Group, “and hoping there can be some course correction federally to allow us to steer the ship.”
