This week, the trustees of the Maryland State Retirement and Pension System announced that the rate of return on its portfolio of investments was not the 7.75 percent they had anticipated. It was 0.36 percent. And, no, that's not a typo -- that rounds down to zero percent growth.
That's bad news for taxpayers, who are already on the hook to fund a $19.7 billion gap -- again, not a typo -- between the portfolio's value and what is owed to current and future retirees. That gap is growing, too. As a consequence, the state faces a potential credit downgrade according to Moody's Investor's Service, which would take away its triple-A bond rating.
The trustees' response to this? There isn't a problem, and the problem isn't their fault.
As The Examiner's Hayley Peterson reported Tuesday, the trustees had the opportunity earlier this month to lower their unrealistic projections of returns. They chose not to, because that would have forced the state to pay more money in to fund state employees' retirements.
Maryland Treasurer Nancy Kopp, who is also trustee chairwoman, said that the past fiscal year was "remarkable for its volatility both in the U.S. and Europe" and that the "long-term performance is a more appropriate measure."
Well, yes, but this past fiscal year probably was not a one-off bad time either. Both the U.S. and Europe may be in for a period of sustained volatility precisely because a lot of officials have taken Kopp's "what-me-worry" attitude toward pensions and public debt.
Nationally, the gap between state assets and their pension and retirement obligations is $1.38 trillion, according to a study out last month by the Pew Center on the States. That's based on data from fiscal year 2010, so the actual numbers have probably gotten even worse since then.
Marylanders should press the state to do more to bring the pension's liabilities in line with its assets, even if that means adjusting benefits. State officials seem to be hoping the problem just goes away.
Now is the time for state officials to address this head-on and make some hard decisions rather than kicking the can down the road -- again.