New York State pension fund reports investment loss, tax increases could follow
New York State Comptroller Thomas P. DiNapoli in his office in Albany in May. Credit: /Hans Pennink
The value of New York State’s pension fund shrank in the year ended March 31 because of stock market losses — and that will likely result in higher taxes as the state and local governments replenish the fund.
State Comptroller Thomas P. DiNapoli, the Common Retirement Fund’s sole trustee, said the investment return was -4.14% and the fund is now valued at $248.5 billion. It was valued at $272.1 billion in the year ended March 31, 2022.
Still, DiNapoli (D-Great Neck Plaza) said the negative investment return doesn’t endanger the benefits owed to 1.2 million government employees, retirees and their beneficiaries. He said they “can rest assured their pensions are secure.”
The investment loss was the largest since 2009’s loss of 26.4% in the Great Recession, records show. The fund has a long-term target for returns of 5.9%.
In 2022, the return was 9.51%; in 2021, 33.55%, and in 2020, -2.68%.
Last year, the pension fund provided checks totaling $15.4 billion to nearly 515,000 retirees and their beneficiaries in New York State and elsewhere. On Long Island, more than 64,800 people received a total of $2.5 billion.
The Common Retirement Fund is one of the largest of its kind, along with funds in California and New York City.
“Recent months have been trying for investors,” DiNapoli said, adding that more than 44% of the fund’s assets were invested in the volatile stock markets.
The value of the fund’s portfolio of U.S. stocks fell 8.29%, year over year, compared with an 8.58% drop in the Russell 3000 Index of the largest public companies nationwide. The portfolio of international stocks was off 4.85%.
The impact on employer contributions made by state and local governments won’t be known for weeks. The new contribution rate is usually announced in early September, and it can trigger an increase in property taxes.
In 2021, Nissequogue village increased taxes for the first time in four years, citing a hike in the pension contribution rate for village employees, among other reasons.
For the year ending March 31, 2024, rates increased from 11.6% to 13.1% of payroll for the Employees’ Retirement System and from 27% to 27.8% of payroll for the Police and Fire Retirement System.
DiNapoli said investment gains and losses are only one factor in setting contribution rates. The others include wage growth, inflation, age of retirement and mortality. The state constitution requires the pension fund to always be fully funded.
Still, E.J. McMahon, a senior fellow at the Empire Center for Public Policy, a conservative think tank in Albany, said last year’s negative investment return “will likely lead to an increase in taxpayer-funded…employer contributions starting in 2024.”
He said annual contribution rates are no longer based on the fund’s returns for a five-year period, which lessens the impact of one bad year. The fund’s “returns over the past two years have averaged barely 5% — so employer contributions will almost certainly have to go up next year, at least slightly.”
DiNapoli spokesman Matthew Sweeney responded, "When investment returns do not meet the target it will create some upward pressure on rates. Investment return is only one of the factors that impact rates, which will be determined toward the end of the summer," he said.
James T. Madore writes about Long Island business news including the economy, development, and the relationship between government and business. He previously served as Albany bureau chief.
