New Jersey Teachers retirement fund continues to fall behind

The Newark Star-Ledger reports:

Even with 12 months of robust investment gains in 2006 and 2007, the balance in New Jersey's pension fund for teachers fell farther behind the amount needed to cover retirement benefits for the 200,000 teachers it covers, an actuary reported this morning.

The value of assets in the Teachers Pension and Annuity Fund grew $1.1 billion, to a total of $36.6 billion during the budget year that ended June 30, 2007. But the value of the the pension benefits owed to teachers grew even faster, rising by $2.6 billion to a total of $48 billion, the actuary, Scott Porter, told members of the fund's board of trustees during their regular meeting.

As a result, the fund now contains only 76 percent of the amount needed to cover the benefits, a drop from the 78 percent it contained last year, according to Porter.

The teachers' fund is the largest of the state's seven retirement accounts, and was the first to receive its annual financial checkup.

The growing shortfall is particularly troubling in light of recent investment performance. According to Porter's report, the fund's investments returned 15.95 percent during the year covered by his report, about double the rate actuaries assume the investments will gain each year.

But steep losses in earlier years and the failure of the state to make billions of dollars in required pension contributions over the past five years kept the fund from keeping pace with the growth in benefit obligations.

So far this budget year the fund's investments have lost about 1 percent in value, and the state budget Corzine proposed last month would under fund the teachers retirement fund by another $684 million.

The growing losses prompted trustees to pass a statement urging full funding of the $1.35 billion Porter said the state needs to contribute this year to keep pace with the growing retirement costs.

"It will become, in time, near impossible for the state to meet its full obligation to the fund," said Dennis Testa, sponsor of the resolution urging full-funding.

Would the SEC allow corporations in the S&P 500 to get away with this kind of shifty balance sheet? We doubt it.