State House Sound Bites

Capitol reporter Katie Meyer covers Pennsylvania politics and issues at the Pennsylvania state capitol.
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State pension fund releases 2016 financial report

Written by Katie Meyer, Capitol Bureau Chief | Aug 7, 2017 8:57 PM
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The state's two largest pension accounts have a combined unfunded liability of around 70 billion dollars. (Photo by AP)

 

(Harrisburg) -- One of the state's two largest pension funds has released its financial report for 2016.

The State Employees Retirement System--or SERS--continued a longstanding pattern last year of coming up short of projected long-term earnings.

It brought in $1.6 billion dollars in 2016. That constitutes a 6.5 percent return, and spokeswoman Pamela Hile said that "when talking about an underfunded pension system, that is very good news."

But it's still less than the rate of return SERS assumes for its investments--7.25 percent. It's important to meet that number on average, because otherwise, liabilities can't be correctly calculated, which can allow chronic under-funding.

Richard Dreyfuss, an actuary who closely tracks Pennsylvania's pension systems, said he thinks the returns SERS is expecting are too high.

"I think we're in for some difficult times ahead, candidly, just because of our mounting fiscal deficits, plus the prospect of increasing interest rates," he said. "So I think it's going to be hard to earn 7.25 percent under any scenario."

The report shows SERS's asset-to-liability ratio is just over 58 percent.

"It's not a healthy sign," Dreyfuss said. "It's certainly not where we should be or want to be."

Hile said the state considers a pension plan healthy at an 80 percent ratio. Dreyfuss disagreed, saying actuaries target 100 percent funding, and that aiming lower constitutes "moving the goalposts."

Altogether, Pennsylvania's pension system has roughly $70 billion in unfunded overhead costs.

This story has been updated to acknowledge disagreement over the funding level that allows a pension plan to be considered "healthy." 

Published in News, State House Sound Bites

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