A Record Pension Fund
May 12, 2014
In another sign that New York's long and difficult recovery from the 2008 recession is picking up steam, the state's public pension fund reached a value of $176.2 billion in the most recent fiscal year — a record sum driven by investment returns slightly above 13 percent.
The figures, which could be adjusted slightly in the weeks ahead, were announced Monday by Comptroller Tom DiNapoli, who called the period "a stellar year for us."
Local governments and the taxpayers who support them will have to wait until late August to find out if the impact on the pension fund's required local contribution will be as stellar: That's when the comptroller's office will announce the size of the required contribution that public employers will have to make to cover the portion of pension benefits not supplied by investment returns.
Last August, that average contribution rate for most employees dropped by 0.8 percent of payroll to 20.1 percent. The average contribution rate for the Police and Fire Retirement System dropped by 1.3 percent of payroll to 27.6 percent.
In recent years, municipalities have seen their pension share spike in large part due to the 2008 market crash, which reduced the fund's value from $153.8 billion in March 2008 to $108.9 billion in March 2009 — six months after the worst period of meltdown on Wall Street.
DiNapoli said the preliminary numbers "strongly suggest" another drop in the local contribution, though the final determination will depend on actuarial trends as tallied by an independent team.
"It's good news for local taxpayers," said Mark LaVigne, deputy director of the state Association of Counties, which for years has communicated the fiscal concerns of local governments to Albany's elected officials.
LaVigne said that while the 2008 collapse dealt the most serious blow to the pension system, the preceding years of increased costs amplified the damage. The Association estimates that local pension bills statewide swelled from $47 million in 2001 to more than $1.2 billion in 2013.
LaVigne noted that the size of the drop in this year's contribution rate will be calculated according to a five-year average of the fund's performance — a mechanism that's intended to protect against sudden spikes, but tends to offset the impact of better news until it's more sustained.
The Common Retirement Fund, the third-largest public pension system in the nation, provides benefits to more than a million state and local government employees, retirees and beneficiaries.
Domestic equities, which make up 37.7 percent of the fund's total investment portfolio, earned a 22.3 percent rate of return. They were outperformed only by global equities — a mere 3.7 percent of the portfolio — which posted a 25.1 percent rate.
The CRF's overall long-term expected rate of return is 7.5 percent.
"The financial markets have given investors a wild ride the last few years," DiNapoli said, "but our investment strategy has allowed us to capitalize on opportunities and minimize risks."
DiNapoli emphasized that New York's public pensions are funded around 89 percent — a robust number that puts New York ahead of other large states such as California, where the teachers retirement system is facing a massive shortfall.