Stars in his eyes

Comptroller Thomas DiNapoli’s announcement today of “stellar” pension fund investment earnings in fiscal 2014 doesn’t mean tax-funded pension costs will be headed rapidly back to “normal,” whatever that may be.

DiNapoli says the Common Retirement Fund, which finances pensions for members of the New York State and Local Retirement System (NYSLRS), gained 13.06 percent last year, well above its assumed average return of 7.5 percent fora second consecutive year.  The fund’s total assets now come to $176.2 billion.

But as usual, such statements need to be taken with a grain of salt. Consider the chart below.  It shows that a dollar invested in the fund in 2000 would now be worth $2.21.  However, if the fund had hit its rate of return target (8 percent before 2010, 7.5 percent since then), that dollar would now be worth $2.90, or 31 percent more.


Since 2000, which capped off its best decade ever in terms of investment performance, the Common Retirement Fund has gained an annual average of just 5.8 percent, including the double-digit returns of the past two years.


  • benefits paid out of the fund increased from $3.7 billion in 2000 to $9.4 billion as of 2013 (the most recent year for which data are available), which translates into annual growth rate of 7.4 percent;
  • annual contributions to the fund by state and local employees dropped from $423 million to $269 million; and
  • taxpayer contributions rose from $165 million to nearly $5.4 billion a year to make up for the fund’s losses in bad years.

The bottom line: benefits keep increasing every year, but asset returns are highly variable — much more so since 2000.

In fact, according to its own most recent actuarial report, the fund has less than a 50-50 chance of earning as much as 7.5 percent annually. If it somehow manages to do so, tax-funded contributions will continue to slowly subside from 2013-14 peak levels.  But if the fund repeats its 2000-05 performance, when it averaged 3.6 percent, the pension bill for taxpayers will shoot up again. And contributions will shoot above 2013 levels if the next five years replicate 2004-09, when the average return was just above 1 percent.

Last but not least, like all public pension systems, NYSLRS uses actuarial assumptions that significantly under-state the true extent of its unfunded liabilities.

About the Author

E.J. McMahon

Edmund J. McMahon is Empire Center's founder and a senior fellow.

Read more by E.J. McMahon

You may also like

DiNapoli audit diagnoses the Health Department’s chronic conditions

A penetrating new audit of the Health Department's pandemic response makes clear that problems at the agency run much deeper than its misreporting of nursing home deaths. Read More

DiNapoli bolsters pension fund stability—and cuts tax-funded costs

DiNapoli announced today that he's approved a recommendation by the State Retirement System Actuary to reduce, from 6.8 percent to 5.9 percent, the assumed rate of return (RoR) on investments by the $268 billion Common Retirement Fund, which underwrites the New York State and Local Employee Retirement System (NYSLERS) and Police and Fire Retirement System (PFRS), of which the comptroller is the sole trustee. Read More

The Gov’s pension

There are several (dozens? hundreds?) of unanswered questions as the fallout from Andrew Cuomo's resignation earlier today continues. Among those are questions related to his pension, some of which can be answered, sort of. Read More

New York’s State Share of Medicaid Spending is Due to Jump 22 Percent This Fiscal Year

The state share of Medicaid spending is projected to jump 22 percent under the recently approved state budget, an unusually steep one-year jump for what is already one of New York's biggest expenditures. Read More

State Tax Receipts Strong Again in November, But Jobs Recovery Remains Slow

New York State's tax receipts in November were a whopping $800 million above Governor Cuomo's projections for the month—further evidence that the current-year budget gap is probably much smaller than Cuomo has been claiming. Meanwhile, however, priva Read More

Cuomo’s $1.7B Medicaid mulligan

This year's state budget came with a hidden asterisk: In the final throes of his negotiations with legislative leaders, Governor Cuomo quietly postponed a month's worth of Medicaid payments from the last week of March to the first week of April – shifting $1.7 billion in spending from one fiscal year to the next. Read More

DiNapoli blocks the union exit

State officials are still working overtime to shield government unions from the impact of the U.S. Supreme Court decision in Janus v. AFSCME. This week, Comptroller Thomas DiNapoli’s office has issued new guidelines effectively giving the unions the first say on efforts by employees to opt out of union dues payments. Read More

NYSTRS bill to drop again

The New York State Teachers' Retirement System (NYSTRS) will reduce its pension contribution rates for a third consecutive year in 2017-18, even though the pension fund's investment returns came in well below its target rate in fiscal 2016. Read More