Funding levels at the nation's largest public pension funds are down for fiscal year 2003, according to a survey sponsored by the National Association of State Retirement Administrators, Washington, and the National Council on Teacher Retirement, Sacramento, Calif.
The third annual Public Fund Survey contains data for 101 public retirement systems, the aggregate funding of which dipped to 91.1% for 2003, down from 96.3% in 2002. The first survey, of 2001 data, showed an aggregate funding level of 100.9%.
The survey also projects the aggregate public plan funding ratio for 2004 will be 88%, based on investment returns through June 30 and assumed market returns of 8%. The median assumed rate of investment return remained steady at 8% in 2003 and 2002.
"There are two factors," said Keith Brainard, research director at NASRA. "One obviously is the three-year decline in equity markets, and the other of liability growth that is the result of benefit enhancements in the late '90s."
The average investment return varied based on fiscal year. The fiscal year for three-quarters of systems participating in the current survey ended June 30, 2003, and their median investment return was 3.7%. For funds whose fiscal year ended Dec. 31, the median investment return was 23.6%. According to the survey, the Federal Reserve Board reported that public pension assets grew nearly 20% during calendar 2003.
The average asset allocation for the 96 systems that answered this survey question was 57% equity, 32% fixed income, 4% alternatives, 4% real estate, 2.5% cash and 0.5% other.