RALEIGH
North Carolina's public-employee pension funds lost $17 billion in value in 2008 as investments faltered in the worldwide recession, but the state's new treasurer, Janet Cowell, said yesterday that the retirement system remains generally solid.
Cowell, on the job only two weeks, announced that the retirement funds reported a 19.7 percent loss on investments for the last calendar year.
The funds' value on Dec. 31 was about $60 billion, down from $77 billion from a year ago, when then-Treasurer Richard Moore reported a positive 8.3 percent return for 2007.
"Obviously we're facing rough economic times, and public pension funds like North Carolina's are not exempt or invulnerable to that financial crisis that we're experiencing as a country," Cowell told reporters at a news conference.
But the North Carolina retirement system, the 10th largest of its kind in the country, remains fully funded, meaning that money is available to pay off all retirees. And the plan should remain in the upper 25 percent of its class in annual returns after other retirement systems announce their 2008 returns, Cowell said.
The pension funds cover 820,000 state- and local-government employees, teachers, emergency officials and retirees.
"You're entitled to your money. You will get your money, and there is plenty of cash in the system," Cowell said in a message to state retirees. "North Carolina is in better shape than almost any state in the country when it comes to this plan."
Returns on stock in publicly traded companies fell in North Carolina's pension funds by 39.9 percent alone during 2008. The benchmark S&P 500 index, comprised of stocks of the 500 companies in leading U.S. industries, fell by 37 percent in 2008.
But the system's shift starting in 2007 to buy a greater percentage of bonds and other debt, and less in stocks, helped temper the losses.
Moore served eight years as treasurer before running unsuccessfully for governor last year.
The funds' bonds and other fixed-income securities reported a 7.4 percent increase in returns, outperforming the market by less than a percentage point, according to Cowell.
"North Carolina has continued to have a very conservative asset allocation," Cowell said. "That is an incredibly good performance this year."
The funds' real-estate investments had a 5.6 percent loss in 2008, and alternative investments, such as private equities, fell by 9.8 percent, Cowell's office said.
Cowell said she will ask the General Assembly to give $29 million more than the roughly $400 million it currently gives each year to the pension funds so they will remain financially sound. But a steeper increase probably will be necessary for 2010 because of the recent losses.
"It gets tougher because I think the budget will continue to be tight," she said.
State employees put 6 percent of their salary into the retirement system, which guarantees them a fixed pension based on pay and experience levels.
The State Employees Association of North Carolina, which serves as an advocate for the group's 55,000 members, wasn't surprised by the negative returns in 2008 but wants the state to give more to make up for the losses.
Cowell said she and her investment team are looking at what changes are needed to increase returns for 2009, but she expects to follow a conservative course.
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