Ten billion dollars.
That's how much the value of public pension funds in Tennessee plunged in 2008's stock market drop - the highest yearly loss in history, according to recent financial reports from some of the state's biggest government retirement programs.
Wall Street's losses will force states, cities, school boards, law enforcement and other government entities to pay more into their employee retirement accounts next year, even as government income reduces or stagnates, public pension managers said Monday.
Georgia pension fund
The value of government employees' pension plans dropped 19.9 percent last year in Georgia
* Georgia teachers plan: Declined from $57.8 billion to $42.1 billion
* Other Georgia state employees: $16.5 billion to $12.4 billion
Source: Georgia Employee Retirement Services
Despite the drop in the value of the state's pension funds, benefits for retirees and workers remain secure and, in most instances, will continue to rise with the cost of living, pension managers said.
"We're going to have to bite off a piece of our losses in the past couple of years, but we have earlier gains and we try to smooth over our gains and losses over time," said Ed Hennessee, director of the Tennessee Consolidated Retirement System, which covers more than 300,000 state and county workers and retirees. "We are going to have to raise the contribution rate next year in response to some of these investment losses, but benefits for employees and retirees are still secure and will continue."
To replenish the weakened accounts, Gov. Phil Bredesen proposes to boost state contributions to the Tennessee Consolidated Retirement System next year by $150 million. School boards and counties whose employees also participate in the state's retirement plan must make similar increases.
Hamilton County Finance Director Louis Wright and Chattanooga Finance Director Daisy Madison said Monday that city and county budgets next year must include extra money for employee retirement programs. Both said it is still too early to calculate how much of an increase will be needed to offset recent investment losses.
Most private sector workers won't be as fortunate, however.
According to the Employee Benefit Research Institute in Washington, D.C., a majority of workers in the private sector no longer have guaranteed benefits at retirement through defined-benefit pension plans as so most government workers. While employers contribute to individual retirement accounts through instruments such as 401(k) plans, the benefits available at retirement depend upon investment returns.
Adam Summers, policy analyst for the conservative Reason Foundation, said the disparity in benefits between public and private sector employees widened last year when many employees in the private sector lost money in their individual retirement plans but most public employees continued to get cost-of-living increases.
"Private sector taxpayers are tired of being responsible for more and more of their own retirement plans and also having to pony up more for government employees so those government employees can live better in retirement than they do," he said.
Government employee groups dismiss such criticism, however, contending that the extra retirement benefits they receive make up for lower incomes while they are working.
"One of the tradeoffs in government at all levels is you get less cash money and you probably get better benefits," Gov. Bredesen said. "Government is attractive to people who want defined benefit plans and it is one of the few places in America left where you can still get those benefits."
Chattanooga firefighters and police officers are eligible for a full pension after 25 years of work, even as young as age 48. Police Sgt. C.W. Joel, the immediate past president of the Southeast Tennessee Chapter of the Police Benevolent Association, said those pension benefits help keep many workers on the job.
"In many cases, that pension is the sole reason that police officers accept the working conditions and pay that they get," said Mr. Joel, a 15-year police officer. "For me personally, it justifies working for what I consider almost a minimum wage.
"In tough times, people become incendiary about our pensions," he added. "But when times are good, they laugh at them."
At the Tennessee Valley Authority, the utility's pension fund is estimated to be only 65 percent funded. TVA spokesman John Moulton said the agency may have to contribute more next year to both its employee retirement fund and its nuclear decommissioning fund - which pays for the dismantling of unused nuclear plants - unless markets improve.
TVA President Tom Kilgore said last year those increases will put extra upward pressure on electricity rates since TVA must absorb the extra costs at a time of lower power sales.
The retirement plans for TVA and Tennessee outperformed the overall stock market in the past year. But Gov. Bredesen said the rising cost of employee pension and health benefits, combined with state commitments already made for the planned Better Education Plan, will likely absorb most of the new state money coming in over the next several years.
"This is a very severe downturn," Gov. Bredesen said.