“There is no question that, with a very few but well-publicized exceptions, public pension plans are healthy, public pension plans are economically efficient and public pension plans are making the changes necessary to ensure their long-term sustainability,” said Hank Kim, Esq., NCPERS Executive Director & Counsel, noting that some recent studies relying on older data have dramatically overstated the financial challenges to public pensions. “In this continuing sluggish economy, and given the contentious political climate in which public pension plans are under attack, it is crucial that policymakers at all levels of government are operating with full and accurate information and that they’re evaluating that information in the proper context.”
Among the survey’s key findings:
- Despite weak short-term investment experience in 2008 and 2009, the long-term investment discipline of fund managers has produced an average one-year return of 13.5 percent, based on the most recently reported data. Funds participating in the study reported a 20-year average return of 8.2 percent.
- Investment returns are the single most significant source of plan funding, comprising about 66 percent of fund revenue. Individual plan members are a significant source of plan funding, contributing 10 percent of plan revenue. Employer contributions comprise only 24 percent of plan revenue.
- Although media coverage has focused on a handful of troubled funds, the vast majority of plans are managed responsibly and maintain strong funding levels. On average, public pension plans are 75.7 percent funded and continue to work toward full funding. According to its February 2011 report Enhancing the Analysis of U.S. State and Local Government Pension Obligations, Fitch Ratings considers a funded ratio of 70 percent or above to be adequate.
