All about investment

by: Walter Rhett

The global credit crunch and capital market collapse drained over 2 trillion dollars of value from this year from American markets has also hit home for retired workers. Many retirees fear the loss of pension benefits as many public systems and private companies have seen significant declines in pension funds, in some cases, by billions of dollars.

If these declines continue, benefit checks to retirees could be frozen or cut. For public systems, states may have to fund shortfalls, making higher contribution to public pension funds from tax revenues. States and local systems may as a last resort issue bonds to cover legal shortfalls, but the current state of the credit markets make such bond offerings a difficult sale and an expensive fix.

Are pensions in immediate danger? No. But the decisions and strategies used by states and municipalities should be watched closely. Monitoring the investment changes in pension portfolios is a prudent course for citizens with a vested stake or an eye toward public fiscal responsibility.

Tight credit and falling values have created a new environment for pension fund directors to operate in, and it is important to know how your state and local managers are adapting their allocations and investments to the new market realities. Public pension funds have information or public affairs telephone numbers to answer inquiries.

Here are several examples of loses recently suffered as the markets plunged.

The federal agency that guarantees pensions (similar to the way Fannie Mae guaranteed mortgages), US Pension Benefit Guaranty Corp lost more than 3 billion dollars.

The Pennsylvania State Employees' Retirement System was down a billion dollars last June.

Allegheny County, Pa's 738 million pension fund down was recently down 5 percent.

Iowa's Public Employee Retirement system faces a short fall of 2 billion (the present market value of it fund is 22.4 billion).

In Wisconsin, the state pension dipped 3 billion. (current value, 80 billion).

In Georgia, the state employees pension fund for public employee and teachers lost more than 11 billion dollars in under four months.

A Texas fund dropped one billion dollars.

Mississippi Public Employees Retirement System has lost more than 10 percent of its value-more than 2.1 billion dollars-recently (17.6 billion, current value).

A 300 point drop in the Dow Jones Industrial Average stock index represents a loss of 450 million for the

Alabama Retirement Systems, an average of 1.5 million dollars per point.

Florida's public pension fund has been hit hard. It lost six percent in three months.

Some state see the current troubles as an investment opportunity. South Carolina, from February, can invest up to 45 percent of its 29 billion pension fund in hedge funds, real estate, and set aside 100 million dollars for purchases of sub prime mortgages! The state had no investments of this type a year and a half ago. One percent of the pension fund has also been set aside for invests in commercial real estate, to be resold as the market recovers. The state's treasurer has said these investment represent acceptable risks, and should benefit the state.

Check your state's fiscal health, especially its public pensions. Participation in a democracy requires each of us to be vigilant as citizens!

(also by the author, Walter Rhett, . . "Wading in the Water": Who Will Present the Better Plan for...). Thanks for reading!

Walter Rhett Walter Rhett attended Ohio State and writes from Charleston, SC. He is a Johns Hopkins University Fellow and a scholarship winner to the Johns Hopkins Summer Writing Institute. He has consulted for Japanese Educational Television and founded a civil war re-enactment unit, the 33rd USCT SC V. Walter contributes to 15 national blogs (LA Times, Seattle Times, Denver Post, Dallas Herald, Kansas City Star, Detroit Free Press, Chicago Tribune, ,Atlanta Journal-Constituion, Charlotte Observer, Washington Post, Philadelphia Inquirer, New York Times, Boston Globe, Christian Science Monitor and USA Today).