January 3, 2011
Re: Financial audit of the state pension system
The firm of KPMG just completed their Financial Statement (audit) of the State Pension and Health Benefit Systems as of June 30, 2010. There are two significant findings reported in the audit statement, of particular relevance to the local governments of New Jersey.
Because local governments and employees have made 100% of their pension payments since 2007, this recent audit confirms that the local portion of the pension system is in better financial condition, than the State.
The pension funds grew by $16.6 billion in the year ending June 30, 2010. This growth is due to two factors. The first, about $8.2 billion was the collective payments made by members and employers, representing their contribution to fund the benefit plan. The second part of the growth comes from investment income. In the last audit, the pension system reported a loss of 14.3%. In this audit, pension investment income reports a gain of 14.8%, representing the amount of $8.4 billion. Together, these two factors account for the $16.6 billion growth.
Asset values, held in trust for the pension funds, grew by $4.7 billion, following the devastating value loss of $17 billion during 2008 and 2009. The net assets grew in valuation from $69.9 billion the prior year to $74.6 billion in the year closing June 30, 2010.
This is an important message that you can deliver to your property taxpayers, since there is some hope to see these costs level out, as the assets grow and the investments show a good return. This next year, your pension bills are going up by an average of 22%. However, increases in your 2012 bills should be much more manageable because of improving investment markets. The League will continue to work to make sure the pension system is strong and solvent for all current and future retirees.
Very truly yours,
William G. Dressel, Jr.