Fla. pension fund loses a quarter of its value but officials say no need to panic
TALLAHASSEE, Fla. (AP) — Florida’s public employee pension plan has lost more than a quarter of its peak value, but Gov. Charlie Crist and other officials Monday said the fund is built for the long haul and there’s no need to panic.
They said Florida has fared no worse than most big investors — a bit better than some major Wall Street indicators — due to slumps in the stock market, real estate and other segments of the national and world economies.
The fund, which covers state and local government employees including teachers, lost $37.9 billion — 27 percent — over 13 months through Oct. 31, said Dennis MacKee, spokesman for the State Board of Administration. That dropped its value to $100.5 billion.
The three-member board chaired by Crist manages 34 public funds totaling $125.4 billion, including investments for the Lottery, the state’s hurricane catastrophe fund and local governments. The largest by far, though, is the retirement plan covering almost 1 million public employees, retirees and their families.
“All funds are down all over the country, let’s face it,” Crist said. “Florida’s a lot better off than most.”
The other board members are Attorney General Bill McCollum and Chief Financial Officer Alex Sink.
“No need to panic with this at all,” McCollum said. “We should expect to be where we are now and we should expect as the market recovers so will this fund, and handsomely so.”
The plan has benefited from the long-term, diversified approach Florida has taken, Sink said in a statement.
“The current global financial downturn has affected everyone,” she said. “Floridians should be confident that the SBA is one of the top-rated public pension funds in the country.”
An annual assessment in June showed the pension fund was worth 7 percent more than the level it would need to fully cover everyone entitled to a pension. It was one of only about a half-dozen public retirement systems on the positive side nationally.
“A vast, vast, vast majority were below 100 percent,” MacKee said. “We’re in an enviable position.”
Richard Ferlauto, national director of corporate governance and pension investment for the American Federation of State County and Municipal Employees, agreed.
“We believe in the long run they are in a position to recover,” Ferlauto said in a telephone interview from Washington, D.C.
It may take three or four years, though. Florida historically has earned about 10 percent annually on its pension fund investments, significantly higher than the national benchmark of 7 percent to 8 percent, Ferlauto said.
He said Florida has been in better shape than most states because it has been strict in requiring state and local agencies to make regular contributions.
McCollum said the board reduced its exposure to common stocks and other equities in spring 2007, preventing the current losses from being even greater.
Most of the decline has come over the last three months. The pension fund’s value dropped by 19 percent since June, MacKee said. He said that compares to 23.8 percent for Standard & Poor’s index of 500 major companies and 24.9 percent for the Russell 3000 Index.
While public employee union officials acknowledge the fund has been well-managed, they are pushing for representation on its investment advisory committee. They also want the board to be more transparent.
“I’m glad that they’ve come out with some information on this,” said Mark Pudlow, spokesman for the Florida Education Association, the statewide teachers union. “It’s a tremendous concern for us.”
The board has been more open since Coleman Stipanovich resigned as executive director last December, said AFSCME spokesman Doug Martin.
Stipanovich stepped down amid a run on the board’s local government investment pool. Cities, counties and other local agencies withdrew billions because part of the fund had been invested in mortgage-backed securities that lost nearly all their value.
The pool has shrunk from $27.3 billion to $6.1 billion due mostly to the withdrawals plus the market slump. That $21.2 billion decline has contributed to an overall one-third drop in the value of the board’s investments by $62 billion in the past 13 months.
Bill Kaczor, Associated Press Writer
Tuesday November 18, 2008, 7:57 am EST