Public pension plans lost a median 13.2 percent in the three months ended March 31, according to Wilshire Trust Universe Comparison Service data released today, slightly more than in the fourth quarter of 2008, the Wall Street Journal reported. March’s stock market plummet led to the biggest one-quarter drop in the 40 years the firm has been tracking. Stocks bounced back in April, making up a significant chunk of the losses. But absent a full and speedy recovery, pension losses are poised to drive up already-burdensome retirement costs for governments. “There will be a lot of pressure to cut benefits,” said Don Boyd, co-director of the State and Local Government Finance Project at the University at Albany’s Rockefeller College. State and local governments “are trying to figure out how to not cut school aid too deeply, not cut Medicaid too deeply, not raise taxes,” Boyd said. “Pension contributions are pretty far down the list of things they want to pay for.” Even before the record first-quarter losses, public pension plans were $4.1 trillion short of the $8.9 trillion they will need to cover promised future benefits, according to the Federal Reserve. Decades of overoptimistic return assumptions, insufficient pension-fund contributions and lengthening lifespans created massive shortfalls in public pension funds that the 11-year bull market didn’t cure. Over the past decade, public pensions had ramped up stockholdings and other risky investments in an effort to meet aggressive return targets that average around 7 percent, according to a survey by the National Association of State Retirement Administrators.
