Plunge Rips Some Pension, Endowment Funds in County

The stock market plunge rippled through Orange County Monday, causing immediate heavy losses in some public employee retirement and college endowment funds.

But while spokesmen expressed various degrees of alarm, all said that their funds should not suffer greatly in the long run.

“We anticipate the market coming back,” said Tom Bogdan, assistant administrator of the Orange County Employees Retirement System. “I don’t know if it will all come back, but I expect at least half of it within a few months.”

More than $300 million of that retirement system’s $1.1 billion in assets is invested in 60-70 stock issues that Bogdan described as “value-defensive stocks--stocks that have shown long-term earnings and growth over time.”

He said no one stock comprises more than 5% of the total stock holding. The remainder of the system’s money is in bonds, real estate, venture capital, mortgages and money-market accounts, Bogdan added.

About 15,000 employees from county government, transit, sanitation and cemetery districts and from San Juan Capistrano’s city government are enrolled in the county system. Almost all other municipal and school employees are part of statewide retirement systems, which likewise suffered setbacks Monday.

California law forbids both state and municipal governments from investing their funds in stocks, a guard against risking public funds, said Robert L. Citron, Orange County’s treasurer and tax collector. “I personally have never owned a share of stock in my life,” he said.

The law does not apply to retirement funds, however. Like corporations and labor unions, government retirement funds are big investors in the stock market, although to a lesser degree, according to pension fund administrators. The typical non-government pension fund has invested 55% of its money in stocks, and some corporation pension funds have allocated 100% for stock purchase.

By contrast, the Orange County system has about 30% of its money in stocks. Bogdan said that while Monday’s plunge of stock prices has made him “cautious,” he is optimistic:

“You have to look at it this way: A lot of people try to measure one day’s movement in the market. Retirement is a long-term play in the market. We don’t take out profits every day. We invest because of fundamentals. We have staying power. We don’t have to automatically recognize our losses. . . . The value of those stocks will come back. We feel the fundamentals have not changed.”

Costa Mesa is the only city in Orange County with an independent retirement system. The Costa Mesa Employees Retirement System covers the city’s 220 police officers and firefighters.

Costa Mesa City Manager Allan Roeder said the system has adopted a policy of investing no more than 25% of its funds in stocks, which amounts to “no more than $5 million, mostly in safe stocks.”

“We are looking for long-term investment, so this doesn’t concern us because it’s a one-day fluctuation, even if it’s this large,” Roeder said.

Some Orange County colleges and universities suffered various degrees of loss, depending on what portion of their private endowment funds were invested in stock.

“I’m in disbelief at what’s happening to the stock market,” said Douglas Bennett, executive director of the private Orange Coast College Foundation in Costa Mesa, which pays for scholarships and part of the college’s sailing and rowing base in Newport Beach. The foundation has $1 million in investments, $400,000 of it in stocks.

“I have this sickening feeling in the pit of my stomach when I hear what has happened,” Bennett said.

“But the fortunate thing is that we won’t need much cash (from the foundation) right away. We funded most of our scholarships in September, . . . and we don’t need immediate money for the boat house. So I think we can ride this thing out.”

At private, four-year Chapman College in Orange, an official said the stock market plunge is bad but not calamitous.

“We have most of our operating-fund investments in bonds and government securities, so we are all right there, but what is happening to the stock market is bad news,” said Howard Langdon, Chapman’s director of finance. He estimated that 15% of the college’s financial investments are in stocks.

Langdon said the market plunge “will be very bad for some of our unitrusts,” funds donated to the college with the request that a portion of their earnings be returned to the donor.

UC Irvine’s private, fund-raising arm, the UCI Foundation, has invested in stock, but a foundation official said Monday the stocks are mainly utilities, which he said neither soared when the market was soaring nor sank with Monday’s decline.

“I think we’re in pretty darn good shape,” said Thomas Casey, investment chairman of the UCI Foundation and senior vice president of First American Trust Co. in Santa Ana. “We put most of our investments in intermediate-term bonds and utility stocks, and they really haven’t been affected that much.”

Casey said the UCI Foundation has about $10 million in assets, of which about $3.5 million are invested in “conservative stocks” and bonds.

“Some people may have thought we invested in pretty fuddy-duddy stocks, but we went into conservative stocks like utilities not seeking growth but income,” Casey said. “So I don’t think we’re going to be badly affected.”

Southern California College in Costa Mesa, a private, four-year religious institution affiliated with the Assemblies of God Church, reported that it is not affected at all by the falling stocks.

“I can sympathize with what’s happening to some other institutions, but we’re not desperate over here because none of our endowment money is in stocks,” said Marshall Flowers, the school’s director of advancement.

Flowers said Southern California College had invested all of its money in mortgage equities.

Similarly, the Cal State Fullerton Foundation, the private, fund-raising arm of that university, also avoided the stock market. “We are not adversely affected at Cal State Fullerton, because the foundation invested its money in certificates of deposit and money-market certificates,” said Sal Rinella, a Cal state vice president.

Rinella said that the Cal State Fullerton Foundation has about $500,000 in long-term investments. Although Cal State Fullerton’s 24,500 students make it the largest four-year institution in Orange County, it has not raised as much private donation as either UC Irvine and Chapman.

Times Staff Writer Nancy Wride contributed to this report