Newspaper article The Florida Times Union

State: Pension Funds Stable; despite $11 Billion in Losses, Officials Say They Still Can Pay Retirement

Newspaper article The Florida Times Union

State: Pension Funds Stable; despite $11 Billion in Losses, Officials Say They Still Can Pay Retirement

Article excerpt

Byline: BRANDON LARRABEE

ATLANTA -- Despite losing more than $11 billion in less than four months because of the collapsing stock market, Georgia's pension funds for state employees still are financially stable and will be able to pay current and future retirees, according to state officials.

Since June 30, the state's separate pension funds for state employees and teachers have gone from a combined value of $65.5 billion to a combined value of $54.1 billion, a drop of 17.4 percent. The Teachers Retirement System now holds $41.6 billion after an $8.7 billion decline, while the Employees' Retirement System stands at $15.2 billion after losing about $2.7 billion.

Included in that damage: The impact of investments in some of the companies that have gone under or such as American International Group, needed capital infusions from the U.S. Treasury to stay afloat. Many once-safe investments, such as stock in Wachovia Corp., have lost more than 80 percent of their market value.

"It's inevitable," state Treasurer Dan Ebersole said. "When you have a fund of this size, you have to maintain diversification and you have to own a vast variety of stocks, and we did. But the nature of a long-term fund is to be able to absorb that volatility over time."

The decline in value is not as deep as the drop in the broad stock market, which has plummeted about 40 percent since the beginning of the year, because the retirement funds hold a substantial amount of bonds. Bonds rise in value as interest rates fall and sometimes move in the opposite direction of stock prices, offsetting stock market declines.

Ebersole added that getting questions about the funds could actually be a sign the worst is almost past.

"Usually, when the public gets worried about it -- and understandably so -- that means that it's about time for the market to turn," Ebersole said.

State officials don't plan to change the investment strategy and remain confident that it can pay the 115,000 retirees that depend on its retirement funds, Ebersole said, and will be able to pay employees who retire in the future. …

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