As good as 2007 was to Pennsylvania's two big public pension funds, 2008 has been the polar opposite, pummeling the state's funds and most other large defined-benefit retirement plans.

The State Employees Retirement System is down $4 billion, to $29.3 billion, for the three-month period ended Sept. 30. Since Jan. 1, it's down about 14 percent -- in other words, the fund already has lost in 2008 nearly the same percentage that it gained during its strong 2007 performance, when its return rate was 17.2 percent, about twice the national average for peer pension groups.

Meanwhile, the Pennsylvania Public School Employees Retirement System, which covers teachers, was down to $55 billion on Sept. 30 from $63 billion three months earlier, a 17 percent fall year-to-date.

Combined, the two retirement funds are down $12 billion in just three months.

Those figures, reported last week, naturally don't include the October and November stock market nose dive, which barring a December rally should bring end-of-year results even lower. And the reporting doesn't reflect the deterioration in real estate, hedge funds and other private investments that fall outside the funds' stock holdings.

The numbers are bad enough on their own. But they are even scarier considering the ongoing recession, which could persist through 2009, and the knowledge that Pennsylvania's pension system, which serves nearly 700,000 retirees and public employees, could be facing a crisis in 2012, when the state's pension subsidy is expected to jump from less than $1 billion to more than $3 billion a year.

The silver lining is that the hot streak preceding the dismal 2008 showing gives the two funds some short-term cushioning.

"We went on a tear there and had just five tremendous years of investment performance," said Robert Gentzel, spokesman for the State Employees Retirement System.

Still, when the State Employees' Retirement board of directors met yesterday in Harrisburg to discuss its annual plan for 2009 (its fiscal year ends in December), there was a lot of talk about how it's going to get worse before it gets better.

"Absent a spectacular market rally between now and Dec. 31, when our fiscal year ends, the SERS Fund's performance for the full year will be substantially below the performance through Sept. 30," SERS' chief investment officer John Winchester said last week.

At yesterday's meeting, the board received its most recent report card, getting capital market updates, its quarterly numbers and reports on its real estate holdings and alternative investments.

"And they're all negative," said Mr. Gentzel. "Everything's down. This fund is facing the same challenges that all other investors are."

Yes, Pennsylvania is in thick company. From coast to coast, state pension funds have been eroded by the sinking stock market, and most funds will see Dec. 31 values that are down 20 or even 30 percent from their year-ago numbers.

Nationally, in the 12-month period ending Sept. 30, public pension plans lost 14.9 percent, according to Wilshire Associates, a financial consulting firm that keeps a database of public pension funds. States are exploring a variety of response measures -- freezing cost-of-living adjustments or increasing employee contributions, for example.

The Pennsylvania constitution bars a reduction in pension benefits, so that won't be an option here. Instead, Pennsylvania's two funds will be tweaking their employer contribution rates, as both rates are tied to fund performance.

The teachers' fund board, for example, will discuss the contribution rate for the 2009-2010 fiscal year, which runs July 1 to June 30, at its upcoming Dec. 12 meeting.

The current employer contribution rate is at 4.76 percent of a teacher's salary, an amount split between the state and the local school district. PSERS ties its annual contribution rate to its June 30 year-over-year results, which were down a bit in 2008, meaning the employer contributions should rise.

But at least the June 30 numbers won't reflect the damage inflicted over the last five months, said Evelyn Tatkovski, press secretary for PSERS.

"The returns that are occurring in the market won't be seen" by PSERS actuaries until next December, when they review numbers from the year ending June 2009.