With the third year of the state's triennial pension funding schedule set to expire in June, the Public Employee Retirement Administration Commission (PERAC) was required to conduct an up-to-date valuation of the state and teachers' retirement fund. By law, each of the state's 106 retirement systems must be revalued every three years and pension funding schedules adjusted accordingly.

Originally, the state's revalued pension schedule called for an appropriation for fiscal 2005 that was nearly $1.4 billion, which is some $600 million more than last year's appropriation. The rise in the scheduled appropriation is the direct result of a down economy, combined with back-to-back early retirement incentives.

At a time when state budget writers are predicting a fourth straight year of budget deficits, it would have been difficult to fund the pension system at that level ($1.4 billion) without having to cut other programs. After months of negotiations, House, Senate and Administration officials agreed to adopt new pension funding assumptions that lower the annual appropriation.

The new schedule calls for an FY05 appropriation of $1.233 billion, increases the amortization rate from 4.15% to 4.5%, and values the fund as of 1/1/04 instead of 1/1/03, as previously done. Importantly, the new schedule maintains 2023 as the date of full funding.