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DiNapoli: NY state pension grows after shaky year in markets

New York State Comptroller Thomas DiNapoli speaks before

New York State Comptroller Thomas DiNapoli speaks before taking his oath of office on Ellis Island in New York Harbor on Jan. 1. Credit: AP / Richard Drew

ALBANY — The state pension fund grew by 3.38 percent for the three months ending June 30, outpacing a national measure of 3.27-percent gain for similar funds during a volatile investment period that continued into a wild past week, according to state and national reports.

The $216.2 billion state pension fund grew by an estimated 7.15 percent for a 12-month period ending June 30, according to the state Comptroller’s Office.

A strong return on investments would mean taxpayers won't likely have to make up the difference between revenues to obligations to retirees guaranteed by the state constitution. That decision, however, won't be made until later this month or September.

"Investment returns are just part of the funding picture," said Matthew Sweeney, spokesman for Comptroller Thomas DiNapoli, as stock market indices fell and rose and fell again by hundreds of points this week. "Determining contribution rates also involves looking at actual experience versus actuarial assumptions, demographic variables and economic variables. You wouldn’t be able to reach a conclusion about employer contributions from one quarter of one part of the funding picture."

DiNapoli's long-term investment return goal is 7 percent. The state's estimated return for 12 months ending June 30 is 7.15 percent. That compares with a 6.47-percent gain in a national index for the same period, according to the Wilshire Trust Universe Comparison Service, which monitors major investment funds nationwide. California's pension fund recorded an annual investment return of 6.8 percent as of June 30. That was just short of its goal of 7-percent annual growth for the $237 billion pension fund, according to The Sacramento Bee.

"The Fund is off to a strong start this fiscal year," said DiNapoli, of Great Neck Plaza, the pension fund’s sole trustee. "Markets have been volatile, however, warranting caution from investors,” he said.

At the end of New York’s fiscal year, on March 31, the investment growth was 5.23 percent, before investments heated up in the spring and summer. But volatility continues.

"Market returns are volatile, as we’ve seen in just the past week,” said E.J. McMahon of the fiscally conservative Empire Center think tank. "So a pension fund heavily dependent on stocks is as likely to be up a few percentage points in one quarter as it is to go down in the following quarter. What matters more is the long-term trend, and in the long term, the pension fund is banking on an average return it is unlikely to achieve."

Nationwide, investments are also paying off at a higher rate this spring and summer after a huge drop in market value in December and a volatile 2018, state and national analysts said.

New York state pension’s estimated return for the 12 months ending June 30 of 7.15 percent compares to an 11.35-percent return in 2018. The return was 11.48 percent in 2017; 0.19 of 1 percent in 2016; and 13.02 percent in 2014, all of which reflected market fluctuations in the economic recovery from the recession.

The state’s long-term investment goal is 7 percent. The state pension fund’s three-year rate of return is 9.32 percent and 10.34-percent return over 10 years, according to the DiNapoli's office.

“Longer term, we continue to take a conservative approach and closely examine our 7-percent target rate of return to determine if it is due for an adjustment as a matter of prudent fiscal management,” DiNapoli said. “Our constant goal is to ensure that New York state’s pension fund remains one of the nation’s strongest and best funded, providing state and municipal employees with retirement security for generations to come.”

In June the Pew Charitable Trust’s analysis of public pensions said the gap between a pension fund’s assets and its commitments to retirees is widening nationwide. It ranked New York’s pension plan as the fourth strongest.

“The New York pension fund is well funded by governmental standards, but that’s a pretty low bar,” McMahon said.

He said the danger of a 7-percent goal for long-term returns is that if the stock market plunges, taxpayers will have to pay to keep the fund fulfilling its obligation to retirees.

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