By By Bob Martin, The Alabama Scene
The rate of return reported by The Retirement Systems of Alabama (RSA) for its pension fund investments for the year ending this past January 31 took a beating.
The rate for its largest pension fund, the Teachers Retirement Fund (TRS), was a minus 24 percent, although over a ten-year period the fund has had a plus 3.5 percent rate. The rate of return for the Employees Retirement Fund (ERS) for the same one year period was a minus 23.7 percent compared to a ten year return of 3.4 percent. The much smaller Judicial Retirement Fund (JRF) lost 27.4 percent of its value during that period but had a positive 2.2 percent performance rate over the previous 10 years.
Over the past 18 months the three funds have lost a combined total of almost $12 billion dollars or about 35 percent of their value, not an insignificant amount.
These losses mirror the performance of most funds in the past couple of years, fueled by the investment fraud which caused the ongoing market meltdown. But as the market returns, which appears to be the case at present, these investments or a part of them should be recovered.
State “on the hook”
There are some state officials who have begun to question the move several years ago to permit RSA to play the market with retirement funds and are citing the current losses to make their case. They tell me they are concerned that some 60 percent of the funds are invested in stocks and believe the percentage of the fund permitted to be invested in the market should be further limited.
One reason they cite is that an annual investment return of about 7-to-8 percent is the amount the RSA funds must earn over time to eliminate any additional support from tax dollars and that a three percent return over ten years just won’t get the job done. They are also suggesting that the TRS and ERS Boards are too inbred with public employees and retirees and should have more public members.
David Bronner, chief executive of the Retirement Systems of Alabama admits that, as long as Alabama is solvent, the state is on the hook for making good on retiree pension payments. “The state is stuck,” Bronner has been quoted as saying. However Acting Finance Director Bill Newton has told the media that the drop in the value of the funds could force lawmakers to shift more and more state money to pay pension benefits – money that otherwise could buy classroom supplies or start new school programs.
Affordable luxury
I have not always agreed with Dr. Bronner. I have strongly opposed the construction of another office building on the site of the old state judicial building which will merely provide state workers more luxurious office space and the now completed construction of a Taj Mahal for the RSA offices
However, I believe his other construction gems will provide tremendous economic value for our state, most notably the Robert Trent Jones Golf Trail (RTJ Trail), the largest golf course construction project ever, coupled with the lodging facilities that surround these golf courses. The Trail is a collection of 468 holes of championship golf on 11 different sites across Alabama.
The Wall Street Journal said the Trail “may be the biggest bargain in the country” and The New York Times called it “some of the best public golf on Earth.”
I had the opportunity to attend my high school class reunion at the Shoals Marriott Hotel and Spa in Florence this past weekend and found it to be one of the finest hotels at which I have stayed. There is ample conference and meeting facilities and the hotel overlooks the Tennessee River and historic Wilson Dam.
It is the perfect place for a family weekend, not to mention the fantastic 36 holes of golf at the “Fighting Joe” named for Confederate Gen. Joe Wheeler, and the “Schoolmaster,” named for President Woodrow Wilson, known as the Schoolmaster of politics, both located just across the river.
By-the-way did I mention the 6,000 square foot spa?
The prices for golf and lodging are a bargain and for those of you in the southern part of the state, the temperatures are still mild in the northwest corner of Alabama.
Bob Martin is editor and publisher of The Montgomery Independent. E-mail him at: bob@montgomeryindependent.com