Teachers' pension fund loses billions in stocks

The fund that bankrolls pensions for 700,000 New Jersey teachers and government workers lost billions on Wall Street over the past year, leaving taxpayers facing the prospect of higher contributions to make up the difference.

Battered by declines in domestic and international stocks, the pension fund lost 3.1 percent for the fiscal year that ended June 30, the state Treasury Department announced yesterday. The losses left the fund with $77.7 billion in assets, almost $5 billion less than the fund contained at the start of the fiscal year.

"This has just been a tremendously difficult market," said Bill Clark, director of the State's Division of Investment.

The performance ends a five-year run of positive investment returns for the fund. Over the past five years, the fund's returns had averaged 10.5 percent, capped by a 17.1 percent gain between July 1, 2006, and June 30, 2007.

Clark emphasized the fund had outperformed other major pension funds, and said even with the year's losses, the fund's average investment performance for the past five years is still above the 8.25 percent actuaries assume it will earn when they calculate how much taxpayers should contribute to the retirement system each year.

The year's subpar investment performance is bad news for taxpayers and workers enrolled in the pension system. Stung by years of skipped taxpayer contributions, the funds started the budget year with $28 billion less than experts calculated they needed to met the long-term costs of benefits promised to current and retired workers.

The new losses pushed the value of the fund below the total in the account in June 2000. But while the fund's value has been running in place for eight years, the cost of the pensions has raced ahead. In 2000, annual pension payments totaled about $3.4 billion. Today, the annual pension payments exceed $6 billion a year -- or 7 percent of the fund's total value. Without investment returns to cover the bills, the task falls to taxpayers and to the employees who are members of the retirement system.

Between 2000 and 2008, employee payments into the retirement accounts jumped from $922 million to $1.5 billion a year. Taxpayer contributions, meanwhile, rose from $218 million in 2000, when state and local governments were taking a "holiday" from pension contributions, to $2.2 billion this year.