State News

State pension fund lost $17B last year

Posted January 23, 2009
Updated March 9, 2009

— The state pension fund lost $17 billion last year – nearly 20 percent of its total value – because of the the downturn in the housing and financial markets, State Treasurer Janet Cowell said Friday.

The fund, which covers 820,000 state and local government employees, including teachers, emergency officials, and retirees, was valued at $60 billion at the end of December. At the end of 2007, the fund had been valued at about $77.1 billion.

U.S. stocks plummeted at the beginning of October, with the Dow Jones industrial average ending the fourth quarter down 19 percent.

Money in hands Governments asked to pay more into pension fund

The decline was the pension fund's first since six years ago, when it lost about 7 percent of its value, and returns the total value to 2003 levels.

Despite the losses, Cowell said, retirees don't have to worry about the safety of their pension checks.

"That is something that can't be renegotiated. It's not something that can be taken away; it is a contractual requirement," she said.

Revenue for the pension fund comes from three sources: payroll deductions of government workers, state and local appropriations equivalent to 3.36 percent of payroll, and investment earnings.

Cowell said she plans to ask the General Assembly for an extra $29 million in the current fiscal year's budget to begin making up the losses. The effort would stretch over five years and would likely entail greater increases in future years, she said.

Lawmakers might have difficulty meeting the request, as the state budget deficit already is projected to hit $2 billion.

Erica Baldwin, spokeswoman for the State Employee Association of North Carolina, said the state should continue to pay more into the pension fund in the future since its current contribution is roughly half that of the employees' 6 percent contribution.

"I think, in good years, if they had gone to the employer – the state – for a match to the employee contribution, we wouldn't be facing as much need from the state budget this year," Baldwin said.

Local governments also will be hit hard, Cowell said.

"They're aware they also will have to be putting additional monies in, you know, at a time when we're having tight budgets," she said.

The pension fund usually needs to take in about $400 million in employer contributions to meet all of its obligations to retirees, she said.

The fund is in better shape than many other public pension funds because the state began shifting money out of stocks and into bonds two years ago, Cowell said. The asset mix is now 41 percent stocks and 46 percent bonds, compared with a usual 50-40 stock-bond mix, she said.

The fund is expected to take more hits in the first quarter of 2009 because of the decline in the value of real estate, which makes up a small portion of the fund's investments, she said.

Cowell said she and her investment team plan to rebalance the fund's portfolio in the coming weeks but will remain conservative. She is targeting a 7 percent return this year, but she said she isn't sure yet how to achieve it.

“During times of market volatility, we don’t ‘double down’ in search of more risk to compensate for our losses,” she said. “We buckle down and continue a careful approach focused on a long-term strategy that ultimately benefits the people of North Carolina.”


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  • ncken1 Jan 23, 2009

    The State Pension Plan still has too much of their funds invested in equities. If you believe this $17 billion loss was significant, just wait for the market to lose another 3,000 to 4,000 points. Remember 11/4/2008....the day the Obama stock market crash began. The stock market value is merely a reflection on the future economy under democratic leadership.

  • Schpartacus Jan 23, 2009

    Garnerwolf1, state employees are eligible for retirement when they achieve one of the following three combinations: 30 years service; 25 years service and age 60; or 5 years of service and age 65. Retirement age only "matters" for those who are not career state employees, and since benefit size is based on years of service, they do not receive very large retirement payments.

  • Garnerwolf1 Jan 23, 2009

    What do you think the retirement age is now? And exactly what does the retirement age have to do with it anyway? Are you saying that somebody that began working for the state at 25 must work 40 years before they get benefits, but somebody that started at age 45 only has to work 20?

  • Cricket at the lake Jan 23, 2009

    Don't happy. Wait until next year and see how much more the fund has plunged. Maybe then she thinks you can start worrying. The stock market is dropping every day now with the new president and the socialist policies that will only plunge the econmoy deeper into recession. Recovery will only begin when all this crazy bail out ends and all of us are allowed to keep our tax money and reinvest it in the economy. May the bottom drop out so we can start going back up again. Why put off the inevitable.

  • chefro Jan 23, 2009

    Want a solution? check this out. Check it out. do it.

  • aspenstreet1717 Jan 23, 2009

    They need to raise the retirement age for state employees to 65. Treat them like everybody else.

  • beachboater Jan 23, 2009

    "We can all collective thank the bush cheny adminstration of the last past years for running the whole economy in to the proverbial ditch" pbjbeach

    "If businesses havent been able to make money in these last past eight years it has been due to NOTHING SHORT OF JUST POOR MANGAMENT THANK YOU" pbjbeach

    So, Bush messed up the economy, but if a company did NOT make money they were managed poorly, huh. Can't have it both ways pbjbeach. The Bush years were bad, or the Bush years were good. You are trying to beat up on an old subject, but blame somebody else. Always blame someone else.

  • london12 Jan 23, 2009

    Retirees must receive what they're entitled. So how will the shortfall be made up? Will money start growing on trees again? More likely it's going to come from the taxpayer (again).

  • Garnerwolf1 Jan 23, 2009

    "We can all collective thank the bush cheny adminstration of the last past years for running the whole economy in to the proverbial ditch." I wasn't aware that a President could singlehandedly control the world's economy. This is great news. Now, all Obama has to do is the opposite!

  • moonpie Jan 23, 2009

    Only lost 20%....that's a lot better than I did...