TALLAHASSEE – State pension plans in Florida and other states took a hit in 2022 as a downturn in financial markets led to investment losses, new reports show.
Reports released by the Florida Department of Management Services and the nonprofit Equable Institute show that during the fiscal year ended Jan.
New York-based Equible, which focuses on public pension system issues, said the state of pensions at the end of 2022 was “fragile” in a report released on Tuesday. However, the 2022 losses came after big investment gains in 2021, including a more than 29 percent gain in Florida.
The Department of Management Services report, released Dec. 22, pointed to a long-term approach by the state Board of Administration, which manages investments in the Florida Retirement System and other state programs.
“Because not all benefit payments are payable immediately, the SBA (State Board of Administration) can pursue a long-term investment strategy,” the report said. “This approach, combined with a well-diversified investment portfolio, helps weather periods of volatility in investment markets.”
The dates in the reports differ somewhat, partly due to timing differences. But both said Florida’s pension system has enough money to pay about 83 percent of its projected liabilities — an actuarial ratio that’s being closely watched.
According to the Equable report, the District of Columbia and 14 other states had better rates than Florida, while the remaining states had rates as low as Kentucky’s 47.3 percent. The report estimates that state and local pension systems across the country were 77.3 percent funded last year, compared to 83.9 percent a year earlier.
“Calendar year 2022 was not a good time to manage pension fund assets,” states the Equable report. “While some hedge funds and money managers have successfully navigated the choppy and volatile investment waters of 2022, most have lost money. Some lost a lot.”
The Florida Retirement System includes hundreds of thousands of workers and retirees in the state government, counties, school boards, and some cities and other types of government agencies. It is funded by contributions from employees, government agencies and investment income.
The Department of Management Services report consisted largely of audit findings from the State Office of the Auditor General. This review found that employees and government agencies contributed $5.04 billion during the fiscal year ended June 30, a 10.3 percent increase from the prior year.
The audit also found that the pension system had a “net fiduciary position,” a calculation of total assets, of $180.2 billion as of June 30. That was down 10.8 percent from a year earlier, reflecting at least some of the investment losses.
In planning, Florida had assumed a return on investment of more than 6 percent for the fiscal year ended June 30, but the total investment loss was 6.27 percent, the state report said.
“States and cities have made full contributions to their pension funds, and in many cases have made additional contributions,” the Equable report said. “But poor investment returns in 2022 have lowered the average funding ratio for state and local plans.”
CBS Miami team
Comments are closed.