UPDATE: Taxpayers to see $20 million increase to state employee pension fund

Friday, September 18, 2009 | 12:01 a.m. CDT

JEFFERSON CITY — The pension board for state workers decided Thursday that the state will need to contribute $276 million into the pension fund for state employees next year, a $20 million increase over the current budget year, according to the state budget office.

The payment is the result of the national economic downturn that cut the investment returns on the retirement fund.

Although large, the amount approved by the pension board is a bit lower than the original $303 million estimate because of a change in accounting practices.

Money for the pension fund is derived from two sources: state contributions and investment earnings.

The fund requires an 8.5 percent return on investment, with any losses or gains distributed over a five-year period in a process called economic smoothing. Extreme losses, however, must be offset with state contributions the next year.

A report from statistical analysts shows the fund suffered an $825 million investment loss last fiscal year. Under normal practices, this would have required the state to contribute more than $300 million dollars. But in a 7-3 vote, the board decided to extend recovery of that loss over an longer period of time.

"I think the plan has good fundamentals," State Treasurer Clint Zweifel said. "If we can get a brief window of two years it seems like it would make sense to give taxpayers relief."

The new method of accounting adopted by the board would be temporary, returning the fund to previous levels in two years.

The fund's executive director, Gary Findlay, cited an uptick in car sales and the freeing of credit signs of a positive stock market.

"There will be gains to keep (the fund) level," he said.

State Sen. Jason Crowell, R-Cape Girardeau, another member of the board, disagreed with Zweifel and Findlay's assessments.

"This is a politicized outcome based on what you want the contribution to be, not a sound financial option," Crowell said.

Crowell, at one point slamming his hand on the table, was the most vocal of the board's three dissenting members.

"You want to cheat," Crowell said.

"I don't want to cheat," said a visibly upset Don Martin, another board member. "You keep twisting these things around."

Although the outcome might produce relief now, it could place a greater stress on future budgets, Crowell said, adding that budgets — even without these changes — will be worse in the future.

While not recommending the change, Norman Jones, one of the analysts hired by the fund, said it would be sustainable if practices returned to current levels in two years.


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John Beaumonte September 18, 2009 | 6:59 a.m.

The University of Missouri and MOSERs have been (so-to-speak) competing with each other for many years. UM's pension fund has also taken big hits since the economy tanked and now UM employees contribute 1%-2% toward their own retirement plans so why isn't the State requiring the same from its employees? Come on - it's the 21st century, retirement practices have changed and free rides have been over for quite a while. Why should tax payers take on the burden of State employee retirement plans because investments have also tanked? Not our fault and we shouldn't have to pay for investment mistakes.

(Report Comment)
John M. Nowell, III September 18, 2009 | 9:30 a.m.

Averaging good times and bad times the overall performance of the stock market is about 11.5% gain during a period of 50 years. What about the years when the market returned over 8.5 %??? The fund managers should have noticed the downward trends soon enough to shift a good portion of the stocks and mutual funds to bond funds such as GNMA to ride out the bear market.

The state workers should not have a guaranteed return on investments paid for by the tax payers of Missouri. Life isn't fair.

(Report Comment)

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