Local Politics

State pension funds lost $4B in latest quarter

Posted April 28, 2009

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— State Treasurer Janet Cowell said Tuesday that North Carolina's public pension funds lost about $4.1 billion in the first three months of 2009.

The negative 6.4 percent return, which left the funds valued at $55.9 billion, was about average for pension funds during the quarter, Cowell said.

About 41 percent of the funds are invested in stocks, with another 47 percent in bonds, 6 percent in real estate and the remainder in other investments.

The funds lost $17 billion in value last year, and Cowell urged lawmakers to put $358 million into the system over the next two years to make up for the losses and for years of small state contributions.

The state contributed 8 to 10 percent of annual payroll to the retirement system in the 1980s and 1990s. In recent years, that contribution has been between nothing and 3 percent because investment gains covered the system's obligations.

A projected $3 billion budget deficit makes it unlikely lawmakers will put as much into the pension funds as Cowell suggests.

Still, she said, the funds have enough money to make payments to retired state workers and teachers.

“North Carolina has available capital and is well-positioned to take advantage of future investment opportunities,” Cowell said in a statement. “I strongly support legislation currently in the General Assembly that would help mitigate pension fund losses by providing the investment team with the flexibility and tools to increase portfolio returns and better manage risk.”

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  • RonnieR Apr 29, 2009

    Thanks, I hold them "forever" and will pass them on,when I pass on, so I always thought of it as a "paper loss" since I really did not loose anything, but a hypothetical loss as the value goes down and a hypothetical gain "paper gain" when they go up.

  • beachboater Apr 29, 2009

    An example of a paper loss in the true sense of the word would be taking depreciation on real estate. You get a tax deduction for depreciation, but in fact, the property is APPREciating. In that example, the loss is on paper only.

    The stock market has realized and unrealized losses. You cannot deduct a loss until and unless the stock is sold or declared worthless. The decline in value is very real. Hopefully the market will recover, but it certainly will not happen overnight.

  • RonnieR Apr 29, 2009

    Why are they real? If you sell, then you won't have as big a capital gains tax to pay and maybe even a loss, and if you don't sell them it doesn't matter. Curious, really.

  • beachboater Apr 29, 2009

    "to increase portfolio returns and better manage risk.” Oh boy!! Absolutely give state government bureaucrats more control over the pension dollars. See where THAT get's us.

    wa4mjf - you need to go back to school and take an economics course. "Paper losses" in the 2008 / 2009 stock market are very real. Paper losses don't necessarily turn into to real losses.

  • RonnieR Apr 29, 2009

    It is probably a paper loss, not a real loss. Folks say they lost a lot in the stock market, for example, what they mean is a paper loss. As long as the dividends come in, the value of the paper is no great concern.

  • ncguy Apr 29, 2009

    Who's kidding who!
    The state will raid some other account or increase taxes to cover the loss.

    Is it fair that everyone that pays taxes has to fork out more to cover their ( state employees) loss- but in the private sector you are on your own.

    I also saw that she said there is capital for purchases?

    Where? how much?

  • affirmativediversity Apr 29, 2009

    When the State takes that 6% out of employees pay it is on the CLEAR UNDERSTANDING that the State WILL MATCH THAT MONEY...is that not "BREACH OF CONTRACT" that they just decide...oh well, to heck with the retirement fund lets spend this money on some other garbage!

    Typical, NC Democrats cut employees pay, health care and retirement contributions first...expand welfare and expensive social programs for criminal migrants!

    All I can say is DON'T LET BEV GET HER GRUBBY HANDS ANYWHERE NEAR THIS FUND!

  • killerkestrel Apr 29, 2009

    The state used to contribute more to retirement, now it relies mostly on the 6% that state employees are required to put in. Investments are cheap, so now would be a good time for the state to put some money in. But it is also a bad time since the state is broke. Guess retiring state employees will get it up the backside in a dozen years when there is not enough money.