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NY pension fund sees record 33.5% return on investments

New York State Comptroller Thomas P. DiNapoli speaks

New York State Comptroller Thomas P. DiNapoli speaks in New Hyde Park, Sunday, Jan. 6, 2019. Credit: Jeff Bachner

ALBANY — A rebound in stocks and other investments at the end of the fiscal year prompted a record annual return for the state pension fund, which may soon help reduce the cost to taxpayers for the employer contributions into the system, according to state Comptroller Thomas DiNapoli.

The 33.5% return on investments in the fiscal year that ended March 31 was led by gains in domestic and global stocks during the economic recovery from the COVID-19 pandemic, DiNapoli said.

"Our retirees and the future beneficiaries can have a sense of security," DiNapoli said in an interview. As for the pension costs paid by local and state governments as employers of public workers, "if we can provide relief, we will try. We still have work to do."

Public pension costs are among the largest drivers of local property taxes.

DiNapoli said a revision of the cost to taxpayers can only be made after longer periods of strong returns on investments, but is also impacted by how many public workers retire and start collecting pensions and how many pension recipients die. He said he will take a renewed look at the taxpayers’ costs at the end of the summer.

But DiNapoli said the record return on investments won’t likely be repeated.

"Markets remain volatile and as unpredictable as ever," he said. "Don’t expect this rate of return to continue. But in the short run, it’s good news."

In the 2019-20 fiscal year, which saw the worst of the economic damage from the pandemic, including job losses and a tanking stock market, the pension fund lost 2.68% of its value.

By comparison, the projected annual return is 6.8% for the next several years. Last fiscal year’s return on investments was the highest since 1998, when the return was 30.4%. The investment revenue increased the value of the pension fund to $254.8 billion. The fund serves more than 1 million public workers and retirees.

Given the decline in the stock market early in the pandemic and a unexpectedly fast rebound, a record return was predictable, said E.J. McMahon of the fiscally conservative think tank called the Empire Center. "The implications of a single year’s experience for future pension costs is very, very limited. In fact, it’s virtually meaningless."

The pension fund’s biggest gains were in domestic and global stocks and other securities, each exceeding a 60% return in the fiscal year, according to the comptroller’s office, which is trustee of the pension.

The record of investment over the years shows the volatility of investments. In 2009, when the recession hit the stock market and investments hard, the fund lost 26.4% of its value. A year later saw a 25.9% return on investments.

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