Ten months into the state's fiscal
year, investment returns on the account that bankrolls pensions
for teachers and government workers are lagging far behind the
rate needed to head off steep increases in the taxpayer contributions
that support the fund.
Through April, the $81.5 billion
pension fund had returned 0.88 percent, managers of the fund told
state officials yesterday.
"It's still been a tough market,"
William Clark, director of the state Division of Investment, said
at the regular meeting of the State Investment Council. "Relative
to where we could be, we're very pleased with the results."
How much the fund gains or loses
on Wall Street has expensive implications for taxpayers.
Experts who calculate how much
the state needs to deposit in the fund each year assume the pension
account will earn 8.25 percent in investment returns each year.
If returns over five years average less than that, taxpayers must
make up the difference.
Clark attributed the weak returns
so far this fiscal year, which ends June 30, to losses on domestic
and international stocks, which make up about half the fund's
holdings.
He also said the state has been
slow to buy into the red-hot commodities market, where investors
are enjoying double-digit gains.
As of April 30, the pension fund,
which supports about $6 billion in pension payments each year,
held less than it did when the budget year opened July 1. At the
start of the budget year, the fund held $82.2 billion, reports
presented to the Investment Council show.
The lagging results are another
setback for a pension fund that actuaries say is already underfunded
by more than $28.3 billion.
Last year, the pension fund re
turned 17 percent, and it has not lost money on its investments
since 2002.
Despite that robust performance,
the account is still suffering from years of skipped state payments
and increases in benefits. State and local taxpayers this year
are scheduled to pay about $2 billion into the fund, but that
is still more than $1 billion short of the amount actuaries say
should be deposited.