April 26, 2011
AFSCME is fighting back against a misleading report released by The Pew Center on the States on public pensions entitled The Widening Gap. In a statement, President Gerald W. McEntee said that the report reflects “ancient history, distorts the true state of public pension funds and is of limited use for anyone hoping to make informed public policy.”
While our opponents are certainly going to use the report as an excuse to portray the public pension system as “broken” and in need of “reform”, the facts don’t back that up.
The Pew report provides a snapshot of public pensions from June 2009, near the very depth of the market during the recession. It simply does not accurately reflect the current state of public pensions.
The real estate and stock market crash of 2008 and 2009 took its toll on all investors. However, while individual investors are still struggling to recover from these losses, pension funds are well on their way to recovery.
Rather than rely on the stale numbers provided in the Pew report, we should instead examine the current state of public pensions in 2011. Just this month the National Conference on Public Employee Retirement Systems released much more relevant data in a member survey assessing the health of public pensions. Here are some of the key findings from the survey:
- In the past year, public pension fund investments have produced an average return of 13.5% and now have a 20-year average annual return of 8.2%.
- Investment returns are the single most significant source of pension funding — comprising 66% of fund revenues.
- The vast majority of public pension plans are managed responsibly and currently maintain strong funding levels. Public pensions are, on average, 75.7% funded and, with market recovery, that number will continue to increase.
Our opponents would also have you believe that our members are receiving lavish pensions at no cost. The reality is that AFSCME members receive, on average, just $19,000 per year in pension benefits, while members’ contributions and investment returns pay 70%-80% of the total cost.