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Public pension funds are recovering from Wall Street crisis

NEA says Pew report distorts the real strength, durability of public pension funds


WASHINGTON - April 26, 2011 -

NEA President Dennis Van Roekel today urged elected officials and policymakers to make sure they have accurate and up-to-date information on the strength and viability of public employee pensions. Van Roekel said a report, “The Widening Gap: The Great Recession’s Impact on State Pension and Retiree Health Care Costs,” released today by the Pew Center on the States, may cause unnecessary alarm because the data do not reflect current market conditions.

New research by the National Conference on Public Employee Retirement Systems (NCPERS) paints a much different, much more accurate, and far more positive picture. Based on the most recently reported data, public funds had an average one-year return of 13.5 percent. Funds participating in the study reported a 20-year average of 8.2 percent.

“Despite a drop in asset levels, stemming from the devastating 2008 stock market crash, pension funds across the country are recovering,” Van Roekel said. “The Pew report is based on the 2008 and 2009 period, following the stock market crash, and the condition of anyone’s portfolio during that period would be dismal. The fact of the matter is that by the end of 2010, state and local government retirement systems were reporting strong investment returns, growing assets, and more than adequate funding levels to provide current and future public employees with the modest retirement benefits they were promised.”

According to Van Roekel, the average pension benefit for educators is modest—approximately $21,000 a year. “I’m not an economist, but as a math teacher I do know numbers. Guaranteed pensions remain the most economical and efficient way to ensure that Americans who have worked all their lives remain financially secure and self-sufficient during their retirement years,” Van Roekel said.

States and localities devote only a small percentage of their spending to pension funding. According to recent estimates by the National Association of State Retirement Administrators (NASRA), less than three percent of all state and local government spending was used to fund public pension benefits. Further, NASRA says this cost should be considered in the context of the well-documented economic benefits that pension benefits generate in every state in the nation.

In most cases, pension funding shortfalls are the result of the market crash. Although the report's snapshot of plan funding cannot be taken as representative of the medium- or long-term outlook for pension plans, Pew is quite right to note that some state governments created the problem by deliberately failing to fund their pension plans.

Van Roekel cautioned that elected officials and policymakers should make sure they are making decisions based on facts, not misinformation. “The truth is that public pension funds are not the cause of state budget crises—Wall Street greed is the real culprit,” Van Roekel said.

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The National Education Association is the nation’s largest professional employee organization, representing
3.2 million elementary and secondary teachers, higher education faculty, education support professionals, school administrators, retired educators, and students preparing to become teachers.

CONTACT: René Carter  202-822-7494, jrcarter@nea.org