Public pension investment returns take a dive.
Inflation kills us on our COLA.
These are not good days for the nation’s public pensions.
Inflation is taking a huge bite from the income public worker retirees receive.
Members of the The Illinois Teacher Retirement System monthly benefit increases each year by 3% regardless of any changes to the the cost of living. Most Illinois retired teachers receive no Social Security benefit.
Unlike TRS, Social Security recipient benefits are tied to living costs and is recalculated on a yearly basis.
But not us.
The other bad news is that public pension investment returns are getting creamed.
Pension and Investments reports:
CalPERS announced Wednesday that its investments returned -6.1% in the fiscal year ended June 30, the first annual loss since 2009. The benchmark return was -7%.
Investor have been on "a wild ride," said Nicole Musicco, CalPERS' chief investment officer, on a media call.
Compare returns of public pension plans with P&I's Pension Fund Returns Tracker
Dan Bienvenue, deputy CIO, total portfolio, said it was "a year of dichotomies" with the first half of the fiscal year reflecting buoyant markets and second half markets battered by inflation, central banks raising rates and geopolitical risk.
CalPERS, the California Public Employees Retirement System, is the largest public pension system in the country.
By “geopolitical risk” I’m guessing they mean the war in Ukraine and increasing tensions between the U.S., Russia and China.
As I have pointed out for years, our Illinois pension fund stand on three funding legs: active teacher contributions, state contributions and return on investments.
Active teachers have never missed a payment.
The state owes over $140 billion to TRS which will never be paid.
The state’s missed payments could not be invested so during the boom years it cost the system a ton of money
It is expected that return on investments should be about +7%.
The first half of this year it is not even close.