New York State Comptroller Thomas DiNapoli recently announced that the state’s Common Retirement Fund enjoyed more than a 13 percent rate of return in the year ending March 31. The $176.2 billion fund exists to provide benefits to 1 million state and local-government employees, retirees, and beneficiaries. In his May 12 statement, the comptroller called […]
New York State Comptroller Thomas DiNapoli recently announced that the state’s Common Retirement Fund enjoyed more than a 13 percent rate of return in the year ending March 31. The $176.2 billion fund exists to provide benefits to 1 million state and local-government employees, retirees, and beneficiaries. In his May 12 statement, the comptroller called the fund’s performance “stellar.”
Tom, before you inflict injury by trying to pat yourself on the back, let’s examine the word “stellar” from other than a one-year perspective. E.J. McMahon of the Empire Center points out that the state retirement fund’s performance has been sub-par over the last 15 years. Using the comptroller’s own assumption of projected average returns, the fund’s assets should be nearly $300 billion, not the current $176 billion. In other words, the fund has grown at an annual average rate of 5.8 percent, well below the optimistic figure you continue to use for fund appreciation.
During this same period, benefits paid from the state retirement fund have exploded from $3.7 billion to $9.4 billion (2013), a growth rate of 7.4 percent. Annual contributions by state and local employees have simultaneously dropped from $423 million to $269 million. And the lucky state taxpayers, whose “contributions” started at $165 million, are now coughing up $5.4 billion annually to cover the deficits of the fund’s general underperformance.
Oh, I forgot to tell you what else DiNapoli left out of his news release. His assumption of a long-term, fund growth rate of 7.5 percent allows him to boast that New York state’s two largest state-level pension systems are better than 90 percent funded. According to McMahon, this only works when using government accounting standards that permit rosy projections. Using more realistic standards adopted by most private-pension funds, these two pension systems are slightly less than half funded.
So what does this Kodak moment tell us? Benefits rise every year, performance can vary, the taxpayers are on the hook for growing liabilities, and DiNapoli is delusional in projecting fund performance.
Our esteemed comptroller is up for re-election in November. His attempt to convince us that all is well in pension land glosses over the underlying problem of a system that is seriously underfunded and in desperate need of a real solution. Me thinks we need someone in that position who will level with the taxpayers and fix the problem.
Now that would be stellar.
Contact Poltenson at npoltenson@cnybj.com