State retirement fund down, but buys $800 million in stocks

By Cy Ryan (contact)

Friday, Oct. 24, 2008 | 5:11 p.m.

CARSON CITY – Like other investors in the stock market, the state’s pension funds have been taking a beating.

As of Sept. 30, the portfolio was down to $18.6 billion, a drop of 7.2 percent.

Dana Bilyeu, executive director of the State Public Employees Retirement System, says it has fallen by more since that last measurement.

But the system bought $800 million in stock in the last week with the market at historic lows. The philosophy is to “buy when it’s inexpensive,” Bilyeu said.

The system, started in 1947, includes an estimated 140,000 government workers, including some 35,000 who draw retirement checks, from 166 units of state and local government.

The system must look at the long-term picture — 40 to 60 years — on its investments, she said. “The long term strategy is to ride the stocks on the way back up.”

Most regular employees contribute 10.50 percent of their salary and the governments chip in a like amount. Police and firemen chip in 16.25 percent and the governments fund a like amount.

System Investment Officer Kenneth Lambert said 1,500 different stocks were purchased and represented a broad range of investments. Over the past 10 years the system has earned an average of 10 percent a year on its investments.

The unfunded liability is $6 billion, meaning that if the system closed today it would be required to pay out that money to the retired employees in the future.

Bilyeu and Lambert appeared before the Spending and Government Efficiency Commission (SAGE) Friday to explain the system.

SAGE, appointed by Gov. Jim Gibbons, is looking for ways to reduce government costs. Among the preliminary suggestions are imposing a moratorium on increasing retirement benefits until the system is fully funded and establishing a minimum retirement age of 60.

SAGE, headed by Bruce James, emphasized it was looking for ways that would hurt the employees the least. Any recommendations would go to the governor and then to the Legislature.

The seven-member retirement board that oversees the system will meet Nov. 13 to decide if the rates have to be changed. An independent actuary evaluates whether the contributions need to be raised to keep the system solvent.

Sonja Hellwinkel, in charge of the benefits, gave a briefing to state workers Thursday on how they qualify, how much money they can expect.

There are raises in benefits after retirement. There are no increases in a person’s check for the first three years of retirement. But then the raises go up anywhere from 2 to 5 percent, depending on how long a person has been drawing a pension.

At its meeting Tuesday and Wednesday in Las Vegas this week, the retirement board was briefed on the financial situation but did not take any action.

The board sets contribution rates, not the Legislature. The Legislature however is able to decide on the benefit package.

Bilyeu said the law is aimed at keeping the system free of politics. It hires the independent actuary to chart the finances and whether a rate increase is needed. Any rate hike would not be effective until June 30.

Cy Ryan may be reached at (775) 687 5032 or cy@lasvegassun.com