Government pension plans in Florida and other states have been hit in 2022 as a downturn in financial markets led to investment losses, according to new reports.
The reports, released by the Florida Department of Management Services and the nonprofit Equable Institute, show Florida’s retirement system saw investment losses of about 6.2% in the fiscal year. which ended on June 30, which is similar to pension system losses across the country. .
New York-based Equable, which focuses on problems in the public pension system, said in a report on Tuesday that the state of pensions at the end of 2022 was “fragile”. The 2022 losses, however, came after strong investment gains in 2021, including a more than 29% gain in Florida.
The Department of Management Services report, released Dec. 22, underscored a long-term approach by the state’s Board of Directors, which manages investments in the Florida Retirement System and other state programs.
“Because not all benefit payments are immediately due, the SBA (State Board of Administration) may maintain a long-term investment strategy,” the report said. “This approach, combined with a well-diversified investment portfolio, helps weather periods of volatility in the investment markets.”
Report data differs somewhat, partly due to timing differences. But the two said Florida’s retirement system has enough money to cover about 83% of its projected liabilities — an actuarial ratio that is being closely watched.
The Equable report said the District of Columbia and 14 other states had better ratios than Florida, while the other states had ratios as low as Kentucky’s 47.3%. The report estimates that state and local pension systems across the country were 77.3% funded last year, down from 83.9% the previous year.
“Calendar year 2022 has not been the ideal time to manage pension fund assets,” the Equable report says. “While a few hedge funds and fund managers managed to navigate the choppy and volatile investment waters of 2022, most lost money. Some lost heavily.
Florida’s retirement system includes hundreds of thousands of workers and retirees from state, county, school board, and some city governments and other types of government agencies. It is funded by contributions from employees, government agencies and returns on investment.
The Department of Management Services report was largely comprised of audit findings by the Office of the State Auditor General. That audit said employees and government agencies contributed $5.04 billion in the fiscal year that ended June 30, an increase of 10.3% over the previous year.
The audit also said the pension system had a “net fiduciary position,” a calculation of total assets, of $180.2 billion as of June 30. This was a decrease of 10.8% from the previous year, at least partly reflecting investment losses. .
When planning, Florida had assumed an investment return of more than 6% for the fiscal year ending June 30, but the overall investment loss was 6.27%, according to the state report.
“States and cities have fully contributed to their pension funds and, in many cases, even provided additional contributions,” the Equable report says. “But low investment returns in 2022 have lowered the average funded ratio of national and local schemes.”