By Lloyd Dunkelberger
Florida’s pension fund that pays for the retirement of state workers, school employees and county workers had a very good year.
Ash Williams, head of the State Board of Administration, which oversees the $132 billion fund, told Gov. Rick Scott and the Cabinet this week that the fund ended the fiscal year in June with 13.2 percent return. The retirement fund increased by $9.65 billion during the last year even after making payments of $6.2 billion to retirees.
The gains are line with other government pension plans across the country. Bloomberg reported this week — based on data from Wilshire Associates — that state and local-government pension funds realized a median gain of 12.4 percent for the year ending in June. Propelled by a strong stock market, the government funds have had a three-year annualized median return of 11.4 percent, with assets exceeding their pre-Great Recession peak.
The Florida pension fund’s stocks and other investments performed well, with the global equity asset class leading the way with an 18.56 percent return. Other assets did well, ranging from a 10.65 percent return for private equity to 16.16 percent for strategic investments. With low interest rates, the fund’s fixed income and cash assets showed paltry gains of less than 0.5 percent.
Williams said while the annual gain was a very positive sign, he considers the long-term performance more critical for the fund. And the numbers showed Florida’s 20-year return at 7.99 percent and 25-year return at 8.93 percent.
“The strong long-term performance can be attributed to continued prudent diversification of assets, cost controls and excellent fund manager selection,” Williams said.
The positive news on the pension funds was cited by Democratic lawmakers and lobbyists for public workers as another sign that Florida has a healthy pension fund that does not to be dramatically changed.
But House Speaker Will Weatherford, R-Wesley Chapel, made it clear again this week that he is not backing off his effort to end the traditional public pension fund for new workers, while replacing the pension plan with a program more akin to the 401(k) plans used by private-sector companies.
“Make sure Florida doesn’t go bankrupt like Detroit — Retweet if you support pension reform,” Weatherford said in a tweet linking to a Tampa Tribune editorial that supported his plan.
Detroit’s pension plan has a deficit that could be as high as $6 billion and it is part of the $18 billion in liabilities that the city cited in trying to win bankruptcy court protection.
Florida’s pension is in much stronger shape, with enough assets and projected funding to pay 86 percent of its future liabilities — a very high rate nationally among government pension funds.
Nonetheless, Weatherford points out the state still has to set aside some $500 million each year for the unfunded liability, which is money that could be used for other state programs.
What this all means is despite the good news on Florida’s pension fund, you can expect another major push from Weatherford in the 2014 session.
The House has already backed Weatherford’s plan. It will again come down to the Senate, where lawmakers this year narrowly rejected the House speaker’s plan this year, opting for a proposal that provided more incentives for new workers to use a 401(k)-type plan, although they still had the option of the traditional pension plan.
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