State News

Cowell: State pension fund needs $358M

Posted February 19, 2009 4:01 a.m. EST
Updated February 19, 2009 1:59 p.m. EST

— 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.