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DiNapoli: State pension fund rebounds from pandemic losses

State Comptroller Thomas DiNapoli.

State Comptroller Thomas DiNapoli. Credit: Jeff Bachner

ALBANY — The state pension fund has rebounded to almost $22 billion above its value before the COVID-19 pandemic hit, said state Comptroller Thomas DiNapoli.

DiNapoli on Monday said the return on investments made in the pension system for most state and local government workers grew 10.1% in the third quarter of this year, which ended Dec. 31. The pension totaled $247.7 billion on Dec. 31, 2020, compared with $225.9 billion on Dec. 31, 2019.

The resurgence makes the fund stronger for pensioners and government workers in the system. But it likely won't change the higher employer contributions that local governments and their taxpayers will have to pay into the pension system beginning in 2022 because of deep losses earlier in the pandemic, a state comptroller's office spokesman said.

The pandemic’s toll from the economic shutdown it forced had cost the pension fund 11.6% of its value from Dec. 31, 2019, to March 31, 2020. That affects taxpayers because reduced return on investments means governments often must increase their employer contribution to the pensions system.

In September, DiNapoli announced that governments’ employer contribution for most workers in the state pension system will rise to 16.2% of their payroll from 14.6%. For the Police and Fire Retirement System pension, the government cost will rise to 28.3% of payroll, from 24.4%. The higher costs will be for the 2021-22 fiscal year under DiNapoli’s two-year forecasting and won't have to be collected until Feb. 1, 2022.

Those rates aren't expected to change in part because the stock market remains volatile and the forecast is meant to be longer term so it can avoid sudden, steep increases in rates, a spokesman said.

The state pension fund’s fall and rise mirrors the historic lows and highs on Wall Street since Dec. 31, 2019, during the first year of the pandemic.

"Continued growth in the stock market has added to the state pension fund’s dramatic increases this year," DiNapoli said. "Investment gains will remain fragile until we overcome the COVID-19 pandemic and see more federal stimulus bolstering the broader economy."

About 54% of the pension fund is invested in the stock market, with additional investments in cash, bonds, mortgages, real estate and other ventures.

"High returns are good for taxpayers who support the pension system and retirees and employees who are members of it," said Andrew Rein of the independent Citizens Budget Commission. "Still, economic uncertainty nationally persists and there could be further volatility in the markets."

But Wall Street’s history since the 1990's housing bubble burst presents a caution, said E.J. McMahon of the Empire Center think tank.

"This latest Wall Street bubble will burst sooner or later," McMahon said. "When all the COVID stimulus is exhausted, the financial markets will experience a terrific hangover, and the pension fund will share in the headache."

The pension serves more than 1 million government retirees, current employees in the pension system, and beneficiaries.

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