BloombergBusiness is reporting that the state and local (including school districts) pension plans had the lowest investment returns since the credit crisis on 2008. A media return of 0.36% (from Wilshire Trust Universe Comparison Service) is far below the expected returns 7% to 8% utilized by actuaries and accounts to calculate net pension liabilities and required contributions.
Returns below the the target level raises the specter of increased government and taxpayer contributions and lower credit ratings for certain issuers (e.g. New Jersey, Chicago and Illinois). This also raises concerns about recent pension bond issues where states are betting on the market returns exceeding the cost of issuance.
