Public pension assets rose 5.5 percent in the fourth quarter of 2010 as stock market gains helped pensions continue to recover from the financial crisis, a federal agency reported Thursday.
The U.S. Census Bureau said that for the 100 largest state and local retirement systems in the country, total holdings and investments increased to $2.637 trillion in the last three months of 2010, from $2.499 trillion in the third quarter.
The Census Bureau also reported that total holdings and investments increased by 7.6 percent from year-earlier levels.
Stocks, corporate bonds and international securities fueled the quarterly increase. Stock holdings grew 4.4 percent, to $819.1 billion, or 32.4 percent of total assets. In the period, the Standard & Poor’s 500 index, based on the stock prices of the country’s largest publicly traded companies, jumped 10.2 percent.
While the pension funds are still down from their peak value of $2.929 trillion at the end of 2007, the gains are certain to ease pressure on states and localities still reeling from the enormous losses their funds suffered in 2008.
Those investment declines dramatically increased states and localities’ levels of unfunded pension and retiree health care liabilities.
Last year, The Pew Center on the States estimated that state and local retiree plans had unfunded liabilities of $1 trillion, based on 2008 data. But some academics and policymakers say the shortfall could be as high as $3 trillion, according to Joshua Rauh, a professor of finance at Northwestern University’s Kellogg School of Management.
In response, dozens of states have cut benefits for new employees while raising mandatory contributions to pay for expected future-liabilities.
Republican lawmakers in the House and Senate have introduced legislation that aims to increase the reporting of state and local pensions.
Their bills would require governments to determine their pension liabilities using a so-called riskless rate based on Treasury bonds and report them to the federal government. Issuers who failed to comply with the requirements would lose their ability to issue tax-exempt bonds.
At the state level, Republican lawmakers in Wisconsin, Ohio and other states are pushing to require public employees to divert a greater portion of their compensation to their retirement benefits. Democrats and public-sector unions see the efforts, coupled with attempts to end collective bargaining rights for most public unions, as an attempt to kneecap labor groups that have traditionally supported Democrats.
