Public Pensions Packed with Government Debt

by
Phil Marrone

Take Action – State Budget Crisis

First quarter results show state and local pension fund investments regained some lost ground, but remain below the same quarter four years ago.

Washington, D.C. _ State and local government pension funds increased 19 percent in the first quarter compared to 2009, but still remain below first quarter 2006, according to the U.S. Census Bureau.

The Census Quarterly Summary released Monday is a survey of the 100 biggest state and local government employee retirement systems, representing 89.4 percent.

“Total holdings and investments continued their quarter-to-quarter climb for the fourth consecutive quarter,” according to the Census report.

The report stated that “public-employee retirement systems show year-to-year increase for the first time in over three years.”

However, a footnote pointed out a merger of the Denver Public Schools Retirement System with Colorado Public Employees Retirement Association “greatly increased the total government contribution for the first quarter of 2010.” The statement did not say how much that improved the apparent performance.

With public and private sector debt mounting, bonds make up almost 41 percent of cash in pension funds, according to the report. Pension cash consists mainly of Corporate Bonds, Federal Securities, International Securities, State and Local Securities, and Corporate Stocks. Debt is a major contributor to public pension funds.

Federal securities comprised over 6.5 percent public pension major cash and securities holdings this quarter. These securities surpassed all expectations when they reversed a three-year negative growth trend, rising 10.3 percent.

International Securities—which comprise 17.2 percent cash in pension funds—are up 1.1 percent. The securities appear to be recouping their 2007 nominal value, but are inconsistent; since this same quarter last year they escalated an unprecedented 59.8 percent.

Corporate bonds compose over one-sixth (16.9 percent) of major public pension fund dollars. This quarter they remained nearly flat compared to the same quarter last year, when they rose 10.5 percent.

Corporate Stocks amount to 33.5 percent pension cash, the largest single category. They are (barely) up 1.9 percent to over $834 billion.

Municipal and State securities are up 8.7 percent from last quarter. Mortgages rose 5.6 percent. Short-term cash investments increased by 2 percent. Other investments up 0.9 percent.

Phil Marrone is a research fellow for Sunshine Review
and State Budget Solutions

You can Follow him on Twitter AntiCult – @treason1776

His blog is AntiCult – Blog for the Culture of Individuality

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