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Florida Pension Fund Loses $27 Billion During Last Year

After a year of plummeting markets, the Florida pension fund stands at nearly $100 billion at the start of the new fiscal year, nearly $27 billion short of where it was a year ago.

The latest estimate puts the pension fund at $99.8 billion compared to $126.9 billion last year at this time. But the drastic market downturn that began last year with the fall of Lehman Brothers, AIG and other financial giants affected investments made throughout the country, including Florida.

Earlier this year, financial advisers to the State Board of Administration, which manages the pension fund, estimated that the account would be at about $100 billion by the end of the fiscal year, short of the $129 billion pension obligation.

“It's pretty much heading according to course,” said SBA spokesman Dennis MacKee.

The shortage means the pension is funded at about 93 percent, but for retirees, there is no practical effect of that because all of the money is not withdrawn at once. Many states operate their pension funds far below 100 percent, and Florida's pension fund is actually considered among the strongest in the country.

A Standard and Poor's report on state pension funds using 2007 data, ranked Florida as the third strongest fund in the country, behind Oregon and North Carolina. Illinois, Oklahoma and Rhode Island were at the bottom of the list, with their pensions all funded below 62 percent.

From 1985 to 1997, Florida's pension fund was underfunded, but rose from a 54.3 percent funding level to 91.3 percent. Then, the dot-com boom happened, taking the fund into several prosperous years where it operated with a surplus. Even when the dot-com bust occurred, the fund remained more than fully funded.

At its highest point in 2000, the pension was funded at 118.1 percent of obligations.

The numbers at fiscal year’s end won’t be finalized until about a month from now and then the SBA's actuaries will begin preparing a full report for its board, which then will be presented to the Legislature. Members of the Investment Advisory Council and board officials have also said they are examining more aggressive investment tactics in order to bring the pension back to fully funded status.

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