NASHVILLE — Tennessee must inject an additional $88 million to begin shoring up its $29.3 billion pension fund, which has seen retirement obligations rise while experiencing huge recession-related investment losses, officials said.
State Treasurer David Lillard emphasized that many of the Tennessee Consolidated Retirement System’s losses are on paper and are not actual losses at this point. The fund, he said, remains sound and meets current obligations to retired state workers, higher education employees and teachers.
“Our plan is not in any immediate danger of any type and, in fact, we’re doing much better than a lot of peers are around the country,” Mr. Lillard said.
Still, state investments at one point were running about $5.4 billion below projections, from a combination of losses in the stock market and less-than-anticipated income on fixed-income investments such as bonds.
That slide will be dealt with over a 10-year period with the amount of additional state payments determined every two years, said Ed Hennessee, an assistant to Mr. Lillard. The 10-year “smoothing” period is utilized to keep the contribution rate as even as possible, he said.
Under the proposal, the state’s contribution rate would rise from 13.11 percent to 15.01 percent.
Mr. Hennessee that about $3 billion of the $5.4 billion drop was recovered during the March-to-January run-up in the stock market.
The $88 million requirement comes as Gov. Phil Bredesen prepares to present his proposed 2010-11 budget on Monday. Lawmakers expect it will cut services by hundreds of millions of dollars because of continued revenue losses.
But the budget also must address demands such as the pension fund, officials said.
On Tuesday, Mr. Lillard made a presentation on the current pension fund situation to Senate Finance Committee members. Expenses of the program are higher in part because retired state employees and teachers are living longer than past assumptions, he said.
Senate Finance Committee Chairman Randy McNally, R-Oak Ridge, noted during the hearing that the fund faces a “perfect storm” with increased obligations and market turmoil.
“The pension fund’s sound,” he said afterward. “People would, I think, like to see the equity markets come back a little bit and fixed investments like bonds come back. I think we went from $33 billion to $24 billion, and we’re now back up to $29 billion.”
Sen. Douglas Henry, D-Nashville, who formerly headed the Senate Finance Committee for decades, later said, “I don’t think we’re in any danger right now,” but the state needs to start taking appropriate actions and not “get complacent about it.”