State economists on Thursday decreased the Florida Retirement System Pension Fund‘s expected rate of return on investments to 7.6 percent, from 7.65 percent.
The Actuarial Assumption Conference had stalemated earlier in the week, with some wanting the rate held at 7.65 percent, and others arguing to go down to 7.5 percent.
Don Langston, staff director of the House of Representatives’ Finance & Tax Committee, agreed with the move, though not without some trepidation.
“Unless something radical changes … to turn the long-term (economic) outlook around, there’s going to be continued pressure on this assumed rate-on-return,” said Langston, who has a doctorate in economics.
“If you depend on this for (state) budgeting purposes, plan accordingly,” he added, referring to lawmakers and staff. “You probably should expect further reductions in the future.”
Here’s why it matters: Pushing investment return assumptions downward almost always means the Legislature has to pony up more money to pay for the pension plan’s unfunded liabilities.
The signs for next year’s budget already aren’t good. Last month, legislators were told the latest income and outgo estimates leave Florida with a scant $7.5 million left over out of about $32.2 billion in available revenue.
The pension plan of the Florida Retirement System, the nation’s fourth-biggest public retirement system, has been approximately 85-87 percent funded in recent years. But retirees are living longer and investments aren’t as profitable as they used to be.
The state’s pension fund ended the 2015-16 fiscal year at $141.3 billion in assets, down from $148 billion the year before. Where the system once had three active workers per one retiree, that ratio now is close to 1-to-1.