On the heels of Governor Paterson’s gloomy budget update, state Comptroller Thomas DiNapoli announced the state’s Common Retirement Fund has lost 20 percent of its value since April 1. That would translate into a drop of $31 billion from the March 31 level of $154 billion.
But the comptroller is a glass-half-full kind of guy. While the fund has been hard hit by the financial meltdown, it “remains strong” and “is built to survive fluctuations in the market, even ones as severe as the current downturn,” he says. And besides, any increase in pension fund contributions has been lagged for a full two years. Which is not to say higher costs won’t be paid–only that they will be delayed. A prolonged shortfall below the retirement fund’s 8 percent target rate of return will tug down its actuarially blended average sufficiently to force large increases in taxpayer-funded employer contributions
In fiscal 2007-08, the state pension fund’s rate of return was only 2.6 percent — its fourth worst performance in the past 25 years. Payments to beneficiaries of $6.8 billion were more than double contributions by employers and employees, so the fund’s net value dropped slightly, from $154.6 billion to $153.9 billion.
As DiNapoli noted, the pension fund has weathered similar downturns earlier in this decade, losing nearly $31 billion after the market peaked in 2000. In that case, however, a 24 percent loss was absorbed over three fiscal years–and the fund recovered virtually all its lost value by 2005.
“The Fund is structured to weather periods of market turbulence,” DiNapoli said. With 54 percent of its assets invested in stocks, and another 14 percent in private equities and real estate, it certainly is exposed to a lot of financial bad weather at the moment. Another sharp market recovery could minimize the inevitable increases for taxpayers starting in 2010. But what if, as some believe, the market is about to experience another “lost decade,” fluctuating wildly at times but ending up back where it started in, say, 2018? In that case, tax-supported employer contributions in New York could rise within the next decade from the current level of 7.4 percent to well over 20 percent of salaries (and higher for police and firefighters).
About the Author
You may also like
One of New York’s Biggest Medicaid Contractors Is Quietly Acquiring a Competitor
Author's note: This post has been updated to correct an error in the second paragraph.
As state lawmakers debate the future of Medicaid home care, one of the program's bigg Read More
The Union Gave Them the Wrong Data. The Pols Cited It Anyway.
The episode shows the extent to which New York elected officials fail to question the state’s public employee unions—or look at data themselves. Read More
New York’s Home Health Workforce Jumped by 12 Percent in One Year
New York's home health workforce has continued its pattern of extraordinary growth, increasing by 62,000 jobs or 12 percent in a single year, according to newly released data from the U.S. Bureau of Labor Statistics. Read More
While New York’s Medicaid Budget Soared, Public Health Funding Languished
Four years after a devastating pandemic, the state has made no major investment to repair or improve its public health defenses.
While funding for Medicaid over the past four years Read More
Unions are pressing bogus arguments for blowing up NY’s public pension debts
New York's public employee unions are arguing, without evidence, that state lawmakers need to retroactively sweeten the pensions of workers who have been on the job for more than a decade. In fact, state and federal data show why state lawmakers shouldn't. Read More
A Medicaid Grant Recipient Sponsors a Pro-Hochul Publicity Campaign
While much of the health-care industry is attacking Governor Hochul's Medicaid budget, at least one organization is rallying to her side: Somos Community Care, a politically active medical group in the Bronx that recently r Read More
New Jersey’s Pandemic Report Shines Harsh Light on a New York Scandal
A recently published independent review of New Jersey's pandemic response holds lessons for New York on at least two levels.
First, it marked the only serious attempt by any state t Read More
Senate, Assembly Budget Plans Include $4B Pension Giveaway
A little-noticed provision in lawmakers’ budget proposals would also be the most costly: their proposal to change state retirement rules would slam New York taxpayers with more than $4 billion in new debt, and immediately drive up pension costs, by retroactively sweetening the pension benefits of public employees. Read More