“We understand these low-returning environments can put pressure on our employer partners and local government budgets.” Many investors aren’t expecting much better in the near term.ĬalPERS CEO Marcie Frost sees “a challenging road ahead as major economies around the world continue to slow and market volatility grows,” according to a statement provided to POLITICO. New Jersey and Illinois pensions also finished their fiscal years in the red - as did almost every other state and local retirement system. The California Public Employees’ Retirement System, the country’s largest public pension, lost almost $30 billion in the downturn. The combination of rising interest rates and sharp declines in the stock market made for a brutal investment environment. But it only takes a couple of years of underperformance to “throw the finances of the system out of whack,” Gilroy said.Īnd 2022 was pretty dismal.
States don’t budget their pension payments based on a single year of returns - those projections are smoothed out so they’re less susceptible to booms and busts. Those challenges get even tougher when investment portfolios don’t hit their marks. That ultimately leaves states with less money to spend on schools, social programs and basic infrastructure - a problem that’s likely to be exacerbated by falling tax revenue and the elimination of billions of dollars in federal Covid aid. Lengthy periods of slow economic growth and weak markets can chill what retirement systems expect to generate from their investment plans - meaning that taxpayers and public workers have to pick up a larger chunk of the cost.
#Citizen press official site full
He’s “fully committed” to paying the state’s full obligation to its retirement system for the third time in as many years in 2023, he said. “When we arrived on the scene, New Jersey’s pension system had either been ignored or underfunded by administrations on both sides of the aisle for more than 20 years,” Murphy said in a statement to POLITICO. Phil Murphy said New Jersey has been slowly ratcheting down its return expectations in anticipation of a slower investment environment.
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