Keep a wary eye on investments
Some West Virginians may not think about it much, but hundreds of thousands of us “play” the stock market indirectly. Billions of dollars in our retirement funds are invested in shares of companies whose stocks are traded on the various exchanges. That makes the tariff battle between the United States and China a concern for us, because it affects stock prices and thus, our retirement investments.
Thoughtful members of the Legislature pay attention to the economy, too, because they understand it may affect the state budget.
Since 1997, the state Investment Management Board has been investing in stocks. At last count, it had about $19 billion in assets, of which more than $14 billion represented two big state pension funds, the Teachers’ Retirement System and the Public Employees Retirement System. About 60% of the money handled by the IMB is invested in stocks. State investments have performed well, often earning more than the 7.5% annually that is a benchmark. But, as the Charleston Gazette-Mail reports, that has not been the case during recent months. In December, the year-to-date value of state investments had decreased by 4.5%.
IMB Executive Director Craig Slaughter told legislators investments have performed well since December, but he cautioned a downturn is likely to occur.
It may happen sooner rather than later. News of the tariff duel sent stock prices plummeting on Monday. Fortunately, there was a rebound later in the week — but it did not recover Monday’s losses.
What makes this of concern to legislators is that state pensions are, for the most part, defined benefit plans. That means employees pay in certain amounts while they are working — and are guaranteed certain returns after they retire. If pension investments do not perform well, the Legislature can be forced to budget money to shore up the funds.
One cannot blame lawmakers and Gov. Jim Justice for wondering why West Virginia never can seem to get a break. Just as collections for the general revenue fund seemed to be on a reliable upswing, there is reason to worry whether the budget will have to be tapped to subsidize state pension funds.
That possibility is something both the governor and legislators must keep in mind as they decide what, if anything, to do with any surplus in state accounts when the fiscal year ends June 30.