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Capitol Comment

    Capitol Comment 277 - Where Do Unions and Government Workers Invest Their Pension Funds?

    05/17/2000

    Many of the major unions in the United States have joined Vice President Al Gore in a well-orchestrated campaign against Governor George W. Bush’s proposal to allow workers to invest a portion of their Social Security taxes in personal retirement accounts that they control. Like Gore, the union bosses say that personal retirement accounts will undermine Social Security and put workers’ retirement “at risk” to the uncertainties of the stock market.

    If the stock market is so risky, why does virtually every union pension fund in America invest the bulk of their assets in the “risky” stock market? Gone are the days when America’s major union pension funds invested most of their money in Las Vegas and Atlantic City. They are doing the smart thing by investing workers’ pension funds in real assets that will grow in value over time and be there when it is time to pay workers’ retirement benefits.

    According to the Federal Reserve, state and local government employee pension funds alone have nearly $3 trillion in assets, 66 percent of which is invested in corporate equities (i.e., stocks). Indeed, 30 of the nation’s 50 largest pension funds are public employee pension funds. According to Pensions and Investment Magazine Online, these 30 funds have $1.5 trillion in assets, 60 percent of which is invested in the stock market. Remarkably, 13 percent of their assets are invested in foreign stocks. So much for “buy American.”

    Most of the trade unions have made similar investment decisions:

    The Western Conference of Teamsters Pension Trust has 40 percent of its $22 billion in assets invested in domestic stocks.
    The United Mine Workers Retirement Fund has more than 44 percent of its $7.5 billion in assets invested in domestic stock and 8 percent invested in foreign stocks.
    The Bakery and Confectionery Union Pension fund has 57 percent of its $5.2 billion in assets invested in domestic stocks and 7 percent invested in foreign stocks.
    Federal employees have also spoken with their investment dollars. The Federal Thrift Savings Plan (TSP) – the government workers’ version of a 401(k) – now has more than $85 billion in assets, 59 percent of which is invested in the stock market. Federal employees have chosen to invest only 5 percent of their TSP funds in government bonds.

    Al Gore and the union leadership are out of touch with their own rank and file: a recent Zogby poll showed that more than 66 percent of union members would “support Social Security privatization if it allowed you to take your Social Security money and invest it in a retirement account of your choosing.”

    America’s Public Employee Unions Have Put Their Trust in the Stock Market Rank Pension Plan Total Assets (Billions) Domestic Stocks Domestic Fixed Income Foreign Stocks Cash and Other

    America’s Public Employee Unions Have Put Their Trust in the Stock Market

    Rank Pension Plan Total Assets (Billions) Domestic Stocks Domestic Fixed Income Foreign Stocks Cash and Other
    1 California Public Employee's Retirement System $155.8 43.9% 23.2% 19.7% 3.0%
    2 New York State Common Retirement Fund $111.4 50.2% 30.3% 11.8% 7.7%
    3 California State Teachers' Retirement System $98.4 42.8% 25.3% 25.1% 6.8%
    4 State Board of Administration of Florida $93.1 58.1% 18.6% 8.6% 14.7%
    7 New York State Teachers' Retirement System $81.5 65.3% 14.6% 9.1% 11.0%
    8 Teacher Retirement System of Texas $79.3 52.7% 34.8% 10.3% 2.2%
    9 New Jersey Division of Investment $74.9 49.8% 21.3% 15.5% 13.4%
    11 New York City Retirement Systems $63.1 55.4% 28.6% 15.3% 0.7%
    15 State of Wisconsin Investment Board $57.7 39.0% 27.0% 16.0% 18.0%
    19 Ohio Public Employees Retirement System $52.8 35.8% 36.5% 17.0% 10.7%
    20 North Carolina Retirement Systems $52.6 49.1% 43.9% 5.4% 1.6%
    22 State of Michigan Department of Treasury Bureau of Investments $51.1 51.4% 21.6% 5.6% 21.4%
    23 Pennsylvania (Commonwealth of) State Employees' Retirement System $47.2 42.6% 13.0% 17.9% 26.5%
    24 Teacher's Retirement System of the City of New York $44.3 65.0% 20.0% 11.0% 4.0%
    25 University of California $41.9 53.8% 25.9% 4.8% 15.5%
    26 Washington State Investment Board $41.1 40.8% 26.6% 17.7% 14.9%
    27 Minnesota State Board of Investment $41.0 54.3% 24.0% 14.8% 6.9%
    28 Georgia Teachers' Retirement System $38.5 50.0% 49.0% 0.0% 1.0%
    29 Virginia Retirement System $35.2 46.8% 26.1% 16.3% 10.8%
    31 Oregon Public Employees Retirement Fund $34.5 40.0% 21.0% 19.0% 20.0%
    33 Maryland State Retirement and Pension System $29.3 45.0% 25.0% 21.0% 9.0%
    36 Colorado Public Employees Retirement Association $28.1 57.8% 7.7% 13.7% 20.8%
    37 Los Angeles County Employees Retirement Association $27.0 34.8% 26.0% 18.5% 20.7%
    38 Massachusetts Pension Reserves Investment Management Board $26.8 46.0% 23.0% 17.0% 14.0%
    39 Pennsylvania (Commonwealth of) State Employees' Retirement System $26.0 38.9% 16.2% 21.3% 23.6%
    41 Alabama Retirement Systems $24.6 39.0% 43.0% 8.0% 10.0%
    43 Tennessee Consolidated Retirement System $23.0 31.6% 52.2% 8.6% 7.6%
    47 Illinois (State of) Teachers' Retirement System $21.7 39.0% 25.9% 13.5% 21.6%
    48 Arizona State Retirement System $21.6 53.0% 15.4% 0.0% 31.6%
    49 Employees Retirement System of Texas $19.5 39.1% 47.6% 12.0% 1.3%
      Total Assets $1,530.0        
      Average Asset Mix   47.0% 27.1% 13.2% 12.4%

    These rankings include both public- and private-sector pension plans
    Source: Pensions and Investments Magazine Online