New York State Common Retirement Fund, Albany, dropped its rate-of-return assumption half a percentage point to 7.5%, New York State Comptroller Thomas DiNapoli announced Thursday.
The change will mean a $900 million increase in funding from state and local governments in New York, starting in February 2012, and will raise yearly contributions to $3.6 billion from $2.3 billion, Mr. DiNapoli said at a news conference.
The $124.8 billion fund is the first major public defined benefit plan this year to reduce its rate-of-return assumption, but Mr. DiNapoli said he expects other plans to follow in the coming months.
Mr. DiNapoli said economic forecasts do not justify the plan’s former 8% return assumption, particularly in light of its 25.9% loss in the 2008-2009 fiscal year ended March 31.
He acknowledged the changes could put more strain on state and local governments, but said those governments had the power to control costs in wage negotiations with employees.
“Unfortunately, it takes the economy a lot longer to climb out of a hole than it takes to fall in it,” Mr. DiNapoli said at the news conference. “The markets are still recovering from the 2008-’09 financial meltdown, and that recovery continues to be volatile.”
Mr. DiNapoli also said the fund’s rate of return for the quarter ended June 30 was -4.38%.