Retired teachers fund falls $13B short of needed bottom line Friday, May 05, 2006 • BY DUNSTAN McNICHOL • Star-Ledger Staff Subpar investment earnings and missed contributions continue to batter the state's retirement fund for teachers and school employees, leaving it $13 billion short of covering future benefits and prompting one of the fund's trustees to warn that insolvency is on the horizon. Overall, the Teachers Pension and Annuity Fund contained $29.6 billion at the close of the state's last fiscal year, a new accounting report shows. That amounts to just 69 percent of the value of the benefits promised to the teachers enrolled in the system. "It's a historic low; it's a major concern," said Dennis Testa, a former president of the state teachers union, the New Jersey Education Association, who sits on the board of the pension fund. "I have a great deal of anxiety, given the direction, that this fund can continue to be viable." The teachers fund was the first of a series of annual financial reports scheduled to be released in the coming weeks on the state's seven retirement systems. State treasurer Bradley Abelow warned that the rest of the state's retirement funds have shown similar declines. For the time being, the teachers fund has plenty of money to cover monthly pension checks. The fund, the largest of the state retirement systems, spends about $2 billion a year on benefit checks to 66,000 retirees and beneficiaries. The problem is the growing gap between the resources the fund has on hand and the lifetime of benefits the state has promised to the retirees and the 143,000 active teachers and employees enrolled in the system. At the end of the last fiscal year, June 30, 2005, that gap stood at $13.3 billion -- $29.6 billion on hand to cover $42.9 billion in promised benefits. The shortfall has grown $3.4 billion wider since 2003, the report shows. It's a dramatic reversal for a fund that as recently as 2000 contained $8 billion more than the amount actuaries said it needed to cover future benefit payments. Since then, the stock market collapse drained billions from the fund even as lawmakers increased pension benefits by 9 percent and stopped making annual payments into the fund. Last year, the new report shows, investment returns fell about $1.3 billion short of the amount needed to meet the gains included in the actuary's financial assumptions. In addition, the state paid only $60 million of the $916 million due. This year's proposed state budget boosts payments into the teachers fund to $805 million, but still falls short of the $1.2 billion the actuary calculated the state owes. Lawmakers seeking options to avoid Gov. Jon Corzine's proposed one-cent increase in the state sales tax have proposed cutting payments into the retirement system even further. Dunstan McNichol covers state government issues. He may be reached at dmcnichol@starledger.com or (609) 989-0341. © 2006 The Star-Ledger. Used by NJ.com with permission.