States' Public Retirement Systems Gain 41 Percent on Investments, Census Reports

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State-administered pension systems as a whole posted a 41 percent increase in earnings on investments in 2011, according to new survey data released by the U.S. Census Bureau Aug. 9.

In its Annual Survey of Public Pensions: State-Administered Defined Benefit Data Summary Report: 2011, the census agency reported that earnings on investments increased from $291.1 billion in 2010 to $410.6 billion in 2011. After investment losses in 2008 and 2009, state pension systems in 2011 had positive earnings on investments for the second consecutive year and, in 2011, earnings reached pre-recession levels, according to the report.

“We'd like to see some more years like that one,” Keith Brainard, research director at the National Association of State Retirement Administrators, told BNA Aug. 13. But people also should keep in mind that public pensions “invest over long periods and focus on the long term,” he said.

Earnings on nongovernmental securities, such as corporate stocks and bonds, foreign and international securities, mortgages, and funds held in trust, increased 12.1 percent in 2011 and represented 72 percent of state pension systems' total assets in cash and securities in 2011, the agency reported.

Increased Cash Investments.

State-administered pension systems increased their cash and short-term investments by 36.4 percent in 2011, from $78.7 billion to $107.3 billion and, during the same period, increased their investments in real property by 28.6 percent, from $83.3 billion to $107.1 billion. Investments in cash and short-term assets accounted for 4.2 percent of total assets in 2011. Real property accounted for another 4.2 percent of total assets in 2011, the report said.

In some respects, the information reported is not new, Brainard said. The Federal Reserve's quarterly report, Flow of Funds Accounts of the United States, contained similar information on the asset values and gains posted at the end of fiscal 2011, he said. “What is new about this Census report is the payroll information and employee contribution information,” he added.

Employee Contributions.

Total government contributions to the 222 state-administered public employee retirement systems covered in the annual survey increased by 10.7 percent, from $64.8 billion in 2010 to $71.7 billion in 2011. During the same period, employee contributions increased by 3 percent, from $33.2 billion to $34.2 billion, according to the survey data.

“That was consistent with developments and trends that we have seen, namely that payroll for employees of state and local government has been pretty much stagnant,” Brainard said. “We've seen a lot of states increase required contribution rates from public employees in the past couple of years, but the dollars that would be generated from those higher required contributions are being offset by reductions in the number of employees,” he said.

Average Annual Benefit.

The average annual benefit payment in 2011 was $24,137, according to the report.

The Census Bureau report was based on statistical data from the fiscal year that began July 1, 2010, and ended June 30, 2011. The data cannot be used as a measure of a pension system's funding status, because the data do not take pension liabilities into account, the agency noted in the report.

“Liabilities are a separate issue,” Brainard said.

By Florence Olsen  

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