Mirroring the experiences of states around the country, New York's pension fund's rate of return declined 26.3% in the fiscal year that ended March 31.
Last week Comptroller Thomas DiNapoli released a preliminary estimate of the New York State Common Retirement Fund's value, showing it had dropped to $109.9 billion from $153.9 billion. The drop means government employers who pay into the system will need to increase their contributions. The increases will not be calculated and released until September. Currently employers pay 7.4% of an employee's salary.
DiNapoli proposed legislation that would amortize the increases over several years to soften the blow to employers, such as county governments, that will have to pay more.
"Benefits remain safe and secure, but the stock market's dive will increase contribution rates for local governments beginning in 2011," DiNapoli said in a press release. "Our legislation will provide state and local government employers an option that will mitigate the impact of increased pension contributions."
The proposed legislation drew criticism from Gov. David Paterson, who asked DiNapoli to provide alternatives.
"The increases in employer pension contributions announced by the comptroller today will have a devastating impact on already-overburdened local property taxpayers," Paterson said. "I am concerned that the comptroller's proposal does nothing to mitigate these additional burdens. Without including information on out-year projections, I am also concerned that there may be long-term ticking time bombs in the system that have yet to be addressed."
Mark LaVigne, a spokesman for the New York State Association of Counties, said the increases will be reflected in counties' January property tax bills.
DiNapoli said the sharp drop in the stock market - the S&P 500 fell 39.6% in the fund's fiscal year - was the largest single factor in the fund's decline. About 42% of its assets are in stocks.
California's state retirement system was valued at $179.9 billion last week, compared to $237.1 billion in June of last year, according to its Web site.
"We're seeing pension fund losses in many states, probably most states, so that's not a big surprise," said Moody's Investors Service analyst Eden Perry. "There will be some pressure on New York State and on most states in the coming few years as they may have to increase their contributions."
New York fully funds its pension obligations, putting more pressure on it now than some other states, which partially fund their pensions, but the approach is a positive one, Perry said.
"There are many states where their pensions are funded at 70% or 80%," she said. "They're looking at, in the longer term, much bigger problems, whereas New York State may be looking at more of a near-term problem as the losses force an increased contribution in the next few years, but it puts them in a better position in the long term as their pension is better funded."
