New York State Comptroller Thomas DiNapoli announced Thursday that he is lowering the anticipated rate of return on investments in New York State’s pension fund and, in turn, raising the contributions local municipalities must make to it to ensure that it is fully funded.
DiNapoli announced at a press conference in Albany that he is lowering the anticipated rate of return on investments made with the fund from 8 percent to 7.5 percent, a level that is more fiscally conservative than the national average for public pensions, according to a report from the comptroller’s office.
In turn, the average contribution rate municipalities outside of New York City must make to the fund will increase from 11.9 percent of salaries to 16.3 percent. For the police and fire retirements system, the rate will raise from 18.2 percent of salaries to 21.6 percent.
During the last quarter, from March 31 to June 30, the fund declined from $133 billion to $124.8 billion. More than 1 million New Yorkers are members, retirees or beneficiaries of the fund. About 70 percent of the fund is invested in equities, and the rest is fixed-income investments. New York is required to analyze the assumed rate of return every five years, DiNapoli said in a prepared statement.
“Unfortunately it takes the economy a lot longer to climb out of a hole than it takes to fall in it,” DiNapoli said. “The markets are still recovering from the 2008-09 financial meltdown, and that recovery continues to be volatile. We handled the meltdown better than most pension funds, but we’re still feeling the impact, and, as I have consistently cautioned, the employer contribution rates I’m announcing today will reflect the impact of the financial crisis.”
Harry Wilson, a candidate opposing DiNapoli for the comptroller’s office, sees DiNapoli’s move as coming too late. “If he was doing his job the last three-and-a-half years, we could’ve dealt with this sooner and created a long-term solution,” Wilson said.
Wilson just released a 50-page paper that applies private sector accounting rules to the state pension fund. His results show that the account is underfunded by between $30 billion and $80 billion.
“My plan is to be honest about our problems right now and create a long term solution,” Wilson said. “It’s going to take a long time to dig ourselves out of the hole Mr. DiNapoli has created.”