Wall Street's meltdown has found another victim, though this one has the potential of biting New York taxpayers.
The state's big pension fund for state and local government employees has lost $31 billion in value since the end of March, state Comptroller Thomas DiNapoli reported Tuesday in a rare midyear update of the fund's performance.
The 20 percent loss in value of the New York State Common Retirement Fund comes amid Wall Street's sharp declines since the nation's financial collapse.
DiNapoli sought to assure retirees that the pension system is still fully funded and the drop in value would have no effect on benefits. But for taxpayers, it may be a different picture.
The performance declines pose serious ramifications for state and local governments that pay into the system for its employees. Healthy increases in the fund's value in recent years led to no increases for state and local government contributions. That benefited property taxpayers who see a share of their annual levies go to government worker pensions costs.
The pension system calculates how much governments pay into the system by averaging the fund's performance over several years. It means if things don't improve on Wall Street, the state and localities in a couple of years could be hit with a sizable increase in their employee pension expenses.
The pension fund was valued at $153.9 billion at the end of its fiscal year on March 31.
"Like every investor, the fund has felt the impact of the global credit crisis," DiNapoli said. "But the fund remains strong, and benefits to the more than one million retirees, beneficiaries and members are safe and secure. Just as importantly, the state and local governments will not face any impact on their contribution rates for at least two years. Our long-term, diversified investment strategy is sound and sustainable."
In September, DiNapoli announced that the contribution rate for state and local government employers would be 7.4 percent of payroll in 2010 -- down from 8.5 percent in 2009. But, come 2011, all bets are off if Wall Street does not show an impressive rebound.
Local government officials were already worried before DiNapoli's announcement Tuesday. Peter Baynes, executive director of the New York Conference of Mayors, said DiNapoli in September warned that employer pension costs could rise in 2011.
"The news he announced today confirms the likelihood of that happening," Baynes said. "When 2011 rolls around and rates go up as it looks like they will, it's going to mean drastic increases in property taxes to offset the increase in pension contributions."
Baynes said the state needs to at least reshape the pension system so that newly hired government workers pay a share of their retirement benefits instead of a system that relies on investment returns by DiNapoli and government employer contributions.
"We're not day traders. We're perpetual investors," DiNapoli said. "The fund is built to survive fluctuations in the market, even ones as severe as the current downturn."
The retirement system has one million members -- about a third of whom are retirees.