New York State’s main pension fund investment pool earned 10 percent in its third quarter and has gained nearly 30 percent since the end of its 2020 fiscal year, according to state Comptroller Thomas DiNapoli, the fund’s sole trustee.

As of December 31, DiNapoli reported, the Common Retirement Fund stood at $248 billion, up from $194 billion as of last March 31, a net increase of $54 billion that reflects a combination of investment earnings, benefits paid out, and contributions by employers and employees during that period. The Fund supports pensions paid to members of the New York State and Local Retirement System, which covers all state and local government employees outside New York City except teachers and administrators.

With 55 percent of its assets invested in publicly traded domestic equities, the pension fund rode a stock-market roller coaster from last February’s all-time highs, to a sickening vertical drop in the early stage of the pandemic last March, breaking back to a series of new highs since late last summer.

From the comptroller’s news release:

“Continued growth in the stock market has added to the state pension fund’s dramatic increases this year,” DiNapoli said. “More importantly, given the ongoing market volatility, our pension fund is strong and well-diversified and ready to meet any ups and downs. Investment gains will remain fragile until we overcome the COVID-19 pandemic and see more federal stimulus bolstering the broader economy. We will continue to manage investments with caution and with a long-term perspective that has been the foundation of our success.”

He should have inserted a period after the word “fragile,” given the extraordinarily heavy debt load falling on the post-pandemic economy.

The Common Retirement Fund bases all of its funding calculations on the assumption that it will earn an annual return of 6.8 percent—which, in turn, is the discount rate used to calculate the value of benefits that must be paid in the future.

Even if there is no further improvement in stock prices over the next seven weeks, the pension fund’s return in the fiscal year is on track to exceed 30 percent, a marked reversal of last year’s 2.66 percent loss. In that case, as illustrated below, something truly noteworthy will have happened: the pension fund’s actual 20-year total return on investment will have finally caught up with and slightly surpassed the system’s long-term return assumptions for the first time since just before the Great Recession bear market of 2007-09.

In reality, of course, roller coasters don’t climb indefinitely, any more than trees keep growing to the stratosphere. The current surge in stock prices won’t last. The only question is whether it all ends in a crash, or a mere 10 percent correction followed by a new bull market, or the kind of long-term stagnation experienced in the 1970s, when the Dow gained less than 5 percent before adjusting for inflation.

When the pandemic-induced tidal wave of Federal Reserve liquidity is exhausted and all the money in the Biden administration’s forthcoming $1.9 trillion stimulus federal stimulus bill has been spent—some of it, inevitably, to boost already generous compensation levels for public employees in New York—the economy and financial system could be left with a tremendous hangover.

In fact, all things considered, this would be a good time for New York’s state and local pension fund to begin ratcheting down its reliance on stocks and re-setting the assumptions used for funding purposes. It should:

  • shift its recent gains to lower-earning but less risky and volatile fixed-income investments, including highly rated bonds, and
  • approve a corresponding further reduction in its discount rate.

The current discount rate of 6.8 percent is low by American pension fund standards—but not compared to more stringently regulated American private single-employer funds, or to public funds in other countries. For example, Canada’s highly regarded Ontario Teachers Pension Plan uses a discount rate of 4.65 percent. The Society of Actuaries has recommended that public pension discount rates “should be based primarily on the current risk-free rate plus explicit risk premia or on other similar forward-looking techniques,” which in current conditions would translate into a rate of 4 to 5 percent.

Lower discount rates will also translate into higher required pension fund contributions by employers—i.e., higher costs for taxpayers—which will more accurately reflect the true cost of guaranteeing ample retirement benefits to public employees.

In the meantime, taxpayers and public employers, go ahead and enjoy the ride—but hold onto your hats.

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

New York’s Hospital Industry Ranks Near the Bottom of Two Quality Report Cards

New York's hospitals remain near the bottom of two quality report cards. The state's hospitals received the lowest rate of any state except Nevada and DC. Read More

Proposed minimum staffing law could push some nursing homes to employ fewer licensed nurses

Some New York nursing homes are likely to scale back their use of higher-trained personnel if proposed minimum staffing ratios become law, according to a review of existing employment patterns. Read More

Surprising upside in NY census total points to bigger shift in Albany

The official 2020 U.S. Census of NY's population—topping 20 million for the first time—is significantly larger than previous estimates. Read More

Empire Downward: Pandemic policy responses are hindering NY’s recovery

New York has been trailing most states in the race to recover from the economically devastating coronavirus pandemic, recent employment data have shown. Read More

New York’s ‘Bluest’ Counties Have the Lowest COVID Vaccination Rates for Older Residents

New York's bluest counties are posting the lowest coronavirus vaccination rates for older residents, a striking contrast with the pattern in the U.S. as a whole. The disparity appea Read More

New York’s ‘Single Payer’ Health Plan Would Disrupt Coverage for Out-of-State Commuters, Too

Under the latest version of the single-payer bill – which has broad support on Democrats in the Legislature – hundreds of thousands of commuters from other states would face the replacement of their current health insurance with a Medicaid-like plan funded with tax dollars and managed by Albany. Read More

The Public Can Now See the Vaccine Task Force Recommendations that the Cuomo Administration Held Back

Even as Governor Cuomo touted vaccine approvals by a state-appointed panel of experts, his office was withholding the group's detailed findings from public view. The governor's six- Read More

Job recovery picks up steam in NY, but still far behind rest of U.S.

New York's private-sector job recovery accelerated in March—but remained far behind the national pace on a year-to-year basis Read More


Sign up to receive updates about Empire Center research, news and events in your email.


Empire Center for Public Policy
30 South Pearl St.
Suite 1210
Albany, NY 12207

Phone: 518-434-3100
Fax: 518-434-3130


The Empire Center is an independent, non-partisan, non-profit think tank located in Albany, New York. Our mission is to make New York a better place to live and work by promoting public policy reforms grounded in free-market principles, personal responsibility, and the ideals of effective and accountable government.

Empire Center Logo "...the Empire Center is the think tank that spent months trying to pry Covid data out of Mr. Cuomo's government, which offered a series of unbelievable excuses for its refusal to disclose...five months after it (the Empire Center) sued, Team Cuomo finally started coughing up some of the records." -Wall Street Journal, February 19, 2021