Managers of $62.3 billion in state pension investments are taking the recent stock-market turbulence in stride, believing that Washington has a solid long-term plan and that quick, short-term adjustments aren’t smart.
“This will have moved the needle, but temporarily,” Washington State Investment Board spokeswoman Liz Mendizabal said Tuesday, one day after many global markets fell more than 5 percent. “We’re long-term horizon investors. We manage a heck of a lot of money. We don’t just move money – and you wouldn’t want to – and lock in your losses.”
State Actuary Matt Smith has been publicly skeptical of the state’s 8 percent long-term investment target for pensions, but he agreed there is no immediate worry.
“This is part of the normal volatility we would expect. This has happened (before),” Smith said. “It’s not surprising to me. We’ll keep an eye on it. If it’s a continued trend, then it’s a concern … from the perspective of pension funding.”
Mendizabal and Smith spoke during a chaotic Tuesday when U.S. stock markets rose by more than 2 percent early, fell into negative territory after Federal Reserve announcements about the economic recovery, then surged at the end to gain 4 percent or more for the day.
Against that backdrop, Mendizabal said the estimated $62.3 billion in the Commingled Trust Fund for pensions had gained about 21.1 percent for the fiscal year ending June 30. Commingled fund gains under executive director Theresa Whitmarsh’s direction were 18.1 percent through March 31. The fund includes all of the state’s defined benefit plan investments.
Mendizabal said the public pension funds are in relatively good shape compared to those of other states. A report by state Treasurer Jim McIntire last year found that overall the Washington pension system is in the black, even after accounting for two plans that have large unfunded liabilities.
Even so, lawmakers approved a repeal of automatic cost-of-living raises this year for retirees in the state’s oldest retirement programs, Plan 1 for public employees and Plan 1 for teachers. That was estimated to save the state about $400 million in pension contributions this biennium and reduce future costs for employers by $7 billion over 25 years, getting rid of more than half of a $7 billion-plus liability.
The Legislature also is pumping nearly $1 billion more into pensions in 2011-13 than in the preceding two-year budget. Reports by Smith’s office on pensions’ sustainability risks propelled some of that new investment.
Brad Shannon: 360-753-1688
bshannon@theolympian.com
www.theolympian.com/politicsblog
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