Where's Chicken Little When You Need Him?

From Forbes Magazine.

Pa. teacher, government pension funds post losses
By MARK SCOLFORO , 11.25.08, 05:00 PM EST

Pennsylvania's massive state government and teacher pension funds reported double-digit declines Tuesday, losses that reflect returns through September but not the market's continued fall since then.

And officials with both systems warned that year-end totals could be even worse.

From July 1 through Sept. 30, the two funds fell by more than $12 billion, or nearly half the size of the current state budget.

The State Employees' Retirement System said its investments fell about 14.4 percent from January through September, while the larger Public School Employees' Retirement System's investments dropped 16.7 percent for the one-year period ending Sept. 30.

The government workers' pension fund shed $4.3 billion dollars from July 1 though Sept. 30, ending the period with a value of $29.3 billion. The teacher fund, the nation's 14th largest public defined-benefit pension fund, lost $8 billion over the same three-month period to a value of $54.7 billion.

The stock market has experienced steep declines in October and November, and the two pension funds warned that their year-end accounting may end up looking worse.

In a statement, the state employees' pension fund said its investment performance in 2008 closely mirrored that of other large public pension funds in a prominent national comparison service.

Over the past decade, the State Employees' Retirement System has produced 8 percent a year on its investments, compared with a median of 5.6 percent for the large pension funds measured by the Wilshire Trust Universe Comparison Service.

For 2007, the system earned 17.2 percent, a $5 billion windfall that was among the best in the nation. By comparison, the S&P 500 grew by 5.49 percent in 2007.

The investment returns are bad news for state government retirees who have been pressuring the Legislature for a cost-of-living increase. Such increases are not automatic.

But state tax revenues for the current year are running hundreds of millions of dollars below expectations, and the decline in pension fund investments raises the likelihood taxpayers will have to pump in billions more to balance the retirement funds even without a cost of living adjustment.