State News

Cowell: State pension fund needs $358M

Posted February 19, 2009

— State Treasurer Janet Cowell said Thursday that the General Assembly needs to kick in an additional $358 million during the next two years to keep the state's public pension funds financially sound.

The funds lost $17 billion in value in 2008 as the nation entered a recession. The funds started 2009 with a value of $60 billion, which Cowell said is enough to cover payments to state retirees.

Cowell said last month she would ask the General Assembly for $29 million more in the next fiscal year than the roughly $400 million the pension funds already receive annually.

With Thursday's announcement, she is boosting the request for additional funding for the fiscal year that begins in July 2010 by $329 million.

The request will further burden lawmakers drawing up a state government spending plan for the next two years.

“I understand this news comes at a time when families, local and state governments and the private sector are tightening their belts as a result of the global recession,” Cowell said in a statement. “However, it is important for budget writers to take these costs into consideration as they craft their respective budgets.”

Cowell said she used actuarial formulas approved by the General Assembly to determine how much was needed to provide long-term stability for the pension system.

State employees contribute 6 percent of their annual pay into the pension system, and the state has been contributing much lower amounts in recent years – up to 2 percent – because investment gains provided enough money to cover obligations, she said. Investment earnings have accounted for 77 percent of the funds for the system in recent years, she said.

With the extra money, the state's contribution over the next two years would be about 6.6 percent of payroll, she said, noting that would be slightly above what the state should be contributing every year.

The public pension system covers 820,000 state employees and retirees. It's been cited as being among the healthiest in the country.

Cowell said the additional money from the General Assembly would not be a bailout of the pension system. The state has a contractual obligation to pay specified benefits to retired state workers, and the money is needed to ensures those obligations are met, she said.

“Employer contributions are a required cost and a contractual obligation to the 535,000 active public employees, including law enforcement officers, firefighters and teachers, covered by the plan,” she said.

72 Comments

This story is closed for comments.

Oldest First
View all
  • killerkestrel Feb 20, 2009

    State employees used to not have to pay state income tax on their retirement. But new state employees (hired since 1981 I think) will have to pay income tax on their retirement. NC chipping away at employee benefits.

  • killerkestrel Feb 20, 2009

    Retirees get their cost of living increases from the performance of the pension fund. Their cost of living increases historicly have not kept up with the cost of living. It's a pain in the back side to have to go to work after 10 years because you can't make it on your retirement that you have no control over.

  • killerkestrel Feb 20, 2009

    The pay for state employees is low. It used to have two things going for it, stable and benefits. But, pay raises don't keep up with inflation, and benefits are getting eroded little by little. Makes me wish I was a federal employee. There, you get a pension and don't have to pay 6%, get paid more, get overtime for engineers, get up to 5% matching in 401k, but you do have to pay part of the health insurance.

    Meanwhile, NC employees have to pay 6% of their low salary into a pension, get no matching in 401k, but don't have to pay for their own health insurance. But they are looking at huge increases in family coverage, again.

    Also, when you withdraw your funds from retirement when you quit, you don't get the interest on your 6%. The state KEEPS that. If it was 401k, you could take it with you elsewhere.

  • killerkestrel Feb 20, 2009

    "I worked for the state and I was personally tasked to help spend over half a million dollars on non critical stuff so the department could get that in the next fiscal budget."

    "Yes, that is a HUGE problem within most departments in state government. - wcnc"

    And it's a huge problem in private business too! Private airplanes for automakers anyone?

  • gordonbabe Feb 19, 2009

    Hey ncguy... get your facts straight!

    State employees don't have a choice regarding their "pensions". It's taken whether they like it or not and "soundly invested".

    No offense, what should be fair to begin with is that the individual determine how to invest that portion. What happens in this case...? Someone is some office in Raleigh is determining what investments are "safe" with someone else's money? How "sound" is that?

    So yes, my dear, the Pension system should also see part of the bailout considering it is also money that is taken from the employee; not in the future like money they "could" earn in another job, but money that has already been taken really without their permission.

    And if it's so "nice" as you put it to be a State employee... why do you sound so envious about it?

  • Eduardo1 Feb 19, 2009

    mAYBE AS ONE POSTER PUTS IT, MY 401k LOSS, HAS NOT BEEN COVERED BY ANYONE. nO ONE HAS BAILED ME OUT FOR MY LOSS FROM THE DOT COMS SEVERAL YEARS BACK. WHO IS COVERING THE LOSS FROM OUR GOOD FRIEND BERNIE?
    MAYBE IT IS TIME TO RE-EVALUATE THE PENSION FUNDING. IT HAPPENS ALL OF THE TIME IN THE PRIVATE SECTOR.
    WHEN TIMES ARE GREAT, PRIVATE & PUBLIC SECTORS BENEFIT, SO WHEN TIMES ARE BAD, WHY DOES THE PRIVATE SECTOR THE ONLY ONES TO BITE THE BULLET. WHAT HAPPENED TO THE BIG CUTBACKS FROM GOV. BEV. LETS FILL THE CLASSES WITH MORE STUDENTS. I HAVE PICTURES TO PROVE, WE HAD BETWEEN 36-40 STUDENTS PER CLASS, AND WE ALL LEARNED WELL. TAKE A LOOK AT GRADE LEVELS WHICH MAY EVEN BE PHONY TO MAKE THINGS LOOK BETTER, WHILE THE CLASS SIZE MIGHT BE MID-20'S. lets revisit the dollars that we are paying for extra-curricular activities: staff, buses, equipment,etc. Once again wonderful to spend when times are great, but in these times, CUT-BACK!

  • james27613 Feb 19, 2009

    The TSERS pension plan is mandatory for us.

    we can't opt out of it.

  • james27613 Feb 19, 2009

    most of the time, they hire a friend to provide payback to
    somebody else for the job and we are passed over as they say.

    or they let you quit the state job, go to another company for
    about a month or two, then repost the job and hire you as
    an outsider for more money then if you stayed in the job you
    had, passing over other good people in the process.

    post the job as open instead of internal and you're
    passed over!

  • james27613 Feb 19, 2009

    Not 6 %, 7.83 % and it will be higher soon.

    http://www.fis.ncsu.edu/budget/data/downloads/TSERS_Instruct_Chart.pdf

    no matching money on our 401k's either.

  • ObamaMustGo aka NCcarguy Feb 19, 2009

    wcnc....I think most people know EXACTLY how these plans are run...THAT'S the problem!!! I'm not going to get YOU to pull money out of your pockets to refill MY 401k, so why should I have to do that for state employees?

More...