NYC Pensions Gain 1.5% in Fiscal Year, Falling Short of Targets

New York City’s five pensions are seeing the weakest investment gains in four years, threatening to leave taxpayers chipping in an additional $732 million through 2020 to make up for lost ground, according to a report from Comptroller Scott Stringer.

The city’s $163 billion pensions for police officers, fire fighters, teachers, civil employees and school administrators gained 1.46 percent for the 12 months ended June 30, the comptroller estimated, after accounting for fees. It would be the smallest return since 2012 and far short of the funds’ 7 percent target.

"This past year was challenging for all investors, but the city pension funds remain focused on the long term,” said Eric Sumberg, Stringer’s spokesman.

New York City’s results are the latest in what promises to be a string of U.S. city and state pensions reporting lackluster returns because of record low bond yields and losses on international stocks. California’s Public Employees’ Retirement System and State Teachers’ Retirement System, the two largest U.S. public pension funds, posted returns of 0.6 percent and 1.4 percent, respectively. 

State and local pensions count on returns of 7 percent to 8.5 percent to pay retirement benefits for government employees. When pensions don’t meet their targets, taxpayers have to make up the difference, leaving less money for services.

Pressure on governments to increase pension contributions has mounted because of investment losses during the recession that ended in 2009, benefit increases, rising retirements and flat or declining public workforces.

New York City budgeted $9.4 billion for the pension funds for the current fiscal year, or 11.5 percent of the $82.1 billion spending plan. The city projects pension spending will grow 3.8 percent through fiscal 2020.

New York City’s pension funds had 34.3 percent of their assets in U.S. stocks, 16.5 percent in international equities and 30 percent in fixed income as of May 31, according to the comptroller’s website.

Stringer, a Democrat, serves as the funds’ investment adviser, custodian and as a trustee.

Before it's here, it's on the Bloomberg Terminal.