Pennsylvania’s pension fund for school employees, PSERS, reported significant gains in the past year — a 14% return on investment. This is higher than the national average, and nearly double the 8% expectation that all estimated costs are based on.
But that isn’t the whole story:
There is a difference in pension funds between “Market Value” and “Actuarial Value.” The Market Value is the current value of investments, which increased 14%, or $6 billion. The Actuarial Value is based on the five-year average of the market value, and will decline this year.
Second, 14% is a great return, and will marginally reduce taxpayers’ future contributions. Unfortunately, lawmakers decided to put less into the fund than we should have been investing. That money could also have earned 14% return, but instead, policymakers deferred costs to future generations.