It’s official: after a decade in which the New York State pension fund’s annual return on assets averaged less than half its target rate, the fund will need to jack up its taxpayer-funded contribution rates next year, Comptroller Thomas DiNapoli announced today. DiNapoli said the rate in 2011-12 would rise from 11.5 percent of salary to 16.3 percent for members of the Employee Retirement System (ERS) and from 18.2 to 21.6 percent for members of the police and Fire Retirement System, (PFRS).

This is no surprise.  In fact, almost precisely the same rate of change in pension contributions was projected by Governor Paterson’s Division of the Budget (DOB) eight months ago, in the 2010-11 Five Year Financial Plan (see table on page 59).

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State Comptroller Thomas DiNapoli yesterday issued a happy talk news release touting the state retirement system’s 26 percent return on investments in fiscal 2009-10, which ended March 31.

“The Fund remains one of the strongest in the U.S.,” DiNapoli said. “We’ve come through one of the toughest recessions in modern times, and now the Fund is well positioned to benefit from the national economic recovery we hope is taking hold. We’re not all the way back yet, and as we’ve seen in recent weeks, there are still challenges in the marketplace. But our foundation is strong. We’re moving in the right direction.”

In fact, even after that gain, the pension fund as of March 31 was nearly $56 billion below the level it would have attained if it had achieved its 8 percent target rate of return for the past five years.  The blue line in the chart below shows returns at the targeted rate; the red line shows actual returns, including the fiscal 2009-10 gain the comptroller is boasting about.

As for those marketplace “challenges” DiNapoli mentioned: since March 31, the Dow Jones Industrial average is down 8 percent, while the S&P 500 has dropped 8.6 percent.

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State Comptroller Thomas DiNapoli today issued a “Strategy for Fiscal Reform” that focuses on the budget process, but his most significant and potentially valuable recommendation deals with debt.

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New York is running out of cash, Comptroller Thomas DiNapoli reported today.  The situation would be worse if Governor Paterson had not ordered delays in portions of some local aid payments, prompting the New York State United Teachers union to file a lawsuit against him.

But don’t worry–these guys will soon be bailing us out.

Or maybe not.

The market value of assets in New York State’s Common Retirement System increased by 18.3 percent during the first half of the 2009-10 fiscal year, Comptroller Thomas DiNapoli announced today.   That brings the total fund value to $126 billion — which, it should be noted, is still $30 billion below its fiscal 2006-07 peak.

The retirement system still has lots and lots of ground to make up.   Over the past five years, the return has averaged just 1.1 percent, according to the latest Comprehensive Annual Financial Report.  That’s nearly seven points below its targeted annual rate of return.  When returns fall short of 8 percent over a five-year moving average, the taxpayers are forced make up the difference through higher pension contributions.

Here’s another way to look at it:

Even if the pension fund ends the fiscal year with a gain of over 20 percent, it appears that taxpayer-funded employer contributions will need to more than double over the next five years to make up for the losses of the past three years, based on projections from previous modeling by the comptroller’s office.

DiNapoli also released this summary of the retirement fund’s asset allocation.  Seventy percent of the assets are classified as equities—which would qualify as a “high-risk” mix for an individual, but is typical of taxpayer-guaranteed public pension funds.

There are no grounds for optimism in the August tax collection numbers released this morning by state Comptroller Thomas DiNapoli.

Net personal income tax receipts were down $83 million, or 4 percent, from the same month in 2008—and a full 12 percent below the August 2007 level.  This, despite a newly enacted 31 percent increase in the marginal rate for high-income taxpayers.

And despite the widely reported boost in auto sales from the federal “Cash for Clunkers” program, which ended Aug. 24, the state’s net sales and use tax receipts for August were down $98 million, or 11 percent.

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Tax-funded contributions to the New York State Employee Retirement System (ERS) will have to jump by 61 percent between 2010 and 2011, state Comptroller Thomas DiNapoli announced today.  Contributions for members of the Police and Fire Retirement System (PFRS)–already higher to begin with–will rise by 21 percent during the same period.  Extrapolating from currently available payroll information, these increases will translate into added costs of at least $400 million for the state and roughly $750 million for local governments and public authorities.

But it won’t stop there. To make up for the system’s investment losses in 2007-08, pension contribution rates will continue rising well into the next decade.  For example, under one scenario modeled by DiNapoli’s office, contribution rates for the ERS and PFRS will rise from their 2011 levels of 11.9 percent and 18.2 percent of payroll, respectively, to 30.3 percent and 41.1 percent by 2015.  The increases in the first three years of the period are consistent with the forecast in the latest financial plan update from the Division of the Budget (DOB).

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