In the category of “good news, bad news,” America’s recovering economy has had a significant positive impact on the Public Employees’ Retirement Fund (PERF), the primary investment fund administered by CalPERS. CalPERS is the largest institutional investor in the United States and it operates the pension program for over 2 million current and retired California public employees.

Last week, CalPERS reported a 21.3% rate of return for PERF over last fiscal year. That’s much higher than in previous years and is especially robust after more than a year of pandemic induced recession. (In February of 2020, the fund declined in value by $15 billion in a single week).

The total value of the PERF now, according to figures released by CalPERS, is $475 billion, an increase of about $80 billion over the last year. Investment performance is just one contributing factor to PERF’s bottom line, along with withdrawals for retirement benefits and contributions by current employees and public-sector employers.

This is good news for California taxpayers. Most of the public pension plans in this state are “defined benefit” plans, meaning that retirees are guaranteed a sum certain; as opposed to “defined contribution” plans, which operate more like 401(k) accounts that may be vulnerable to wide variations in the market.

The problem with defined benefit plans, from the perspective of taxpayers, is that they are responsible to ensure payment of those promised benefits later, even if there isn’t enough money in the retirement fund to cover them. Because of the risk to taxpayers, many states have converted to defined contribution plans which, from the taxpayer and employer perspective, are much less risky.

The positive investment performance might help rehabilitate CalPERS’ reputation given that CalPERS has a sordid history of scandal and mismanagement. Just last year, CalPERS’ chief investment officer Yu Ben Meng resigned amid allegations that he had approved a $1 billion deal with a firm in which he was a shareholder.

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