WASHINGTON The value of assets in state retirement systems fell by $641.3 billion to $2 trillion in 2009, the U.S. Census Bureau said in a report on Thursday that showed the deep damage done to pension funds by the financial crisis.
The 24 percent drop followed a loss of $152.2 billion the previous year.
The declines came from a $485 billion decrease in earnings on investments in 2009, after a nearly $440 billion loss in 2008, according to the U.S. Census.
Public pension funds are backed by contributions from employees and employers and by earnings from investments, which provide more than half of revenue. This makes retirement systems, especially ones as large as California's, a force in the markets.
The value of the all state funds' assets peaked at $3.2 trillion in 2007 then fell by more than a quarter to $2.8 trillion in 2008, when the financial crisis took hold, according to the Federal Reserve.
Last week, two public pension fund associations said the assets held by retirement systems rose to $2.93 trillion in 2010, indicating the worst of the crisis may be over.
While retirement systems can pay for pensions to current retirees, they are short more than $600 billion for future benefit payments, a report from the Pew Center on the States said earlier this week.
Those in the $2.9 trillion U.S. municipal bond market are worried that the large obligations could affect the credit-worthiness of many states. On Wednesday, two of the three major rating agencies raised flags about the fiscal condition of New Jersey, citing the state's $31 billion public pension shortfall.
(Reporting by Lisa Lambert and Chip Barnett in New York; Editing by Padraic Cassidy)