New York state and local government employers will have to increase average pension contributions to 16.3% of salaries from 11.9%, Comptroller Thomas DiNapoli announced Thursday. He also lowered the assumed rate of return on pension fund investments to 7.5% from 8%.
The New York State Common Retirement Fund dropped in value to $124.8 billion as of June 30 from $132.6 billion on March 31, posting a negative 4.38% quarterly return.
Contributions for fire and police employees will rise to 21.6% from 18.2%. The increases go into effect in fiscal 2012, which begins April 1. Pension contributions are calculated using a five-year averaging that smooths out sharp changes in the market.
“We had a significant market loss two years ago, last year we were up 25% — this has just been reflective of the volatility of the markets,” DiNapoli said in a news conference in Albany. “We all need this economy to recover and to be stronger.”
The weak economy has hammered pension funds, requiring government employers to increase contributions at the same time they face revenue shortfalls. Three years ago, when the economy was still in its bubble, DiNapoli announced contribution rate reductions for the pension fund that was then valued at $154.5 billion.
At that time, the pension system was funded at 104% of its projected liabilities and it posted a 12.58% return on its investments in fiscal 2007. DiNapoli said Thursday that the pension fund would be 94% funded by the end of the year.
“These increases are a direct indication of how the prolonged recession is impacting our local government operations, combined with six quarters of low sales tax receipts, increased costs in service delivery, delays in state reimbursement for state programs and services delivered locally,” said Mark LaVigne, deputy director of the New York Association of Counties. “We’re going to feel this for the next several years.”
A state law passed this year gives government employers, such as counties and municipalities, the option of amortizing the increase over 10 years, though they would pay 5% interest on the payments.
“The increases will force counties to take a hard look at the option to amortize,” LaVigne said.