- The Washington Times - Sunday, October 28, 2001

From combined dispatches
The retirement fund for Maryland state workers lost money in the receding stock market last fiscal year and will need millions of taxpayer dollars next year to meet its obligations.
The $32 billion fund lost 9 percent, or $2.88 billion, of its value on investments in the year ending June 30, said Treasurer Richard N. Dixon, who is also chairman of Maryland's pension fund.
About 77,000 retired state employees and teachers receive monthly payments from the $32 billion fund.
The problem is rooted in the declining stock market, which Maryland has clung to even though stocks have been drifting lower and lower for more than a year. While other money managers sheltered their funds by selling poor-performing stocks to buy more dependable and profitable high-grade corporate and municipal bonds, Maryland kept 72 percent of its investments tied up in stocks 49 percent in U.S. stocks and 23 percent in foreign stocks, according to Pension & Investments, a trade publication that tracks state funds.
The remainder of Maryland's pension money is invested in fixed-income accounts and a small amount of cash and Treasury bonds.
Virginia is also heavily invested in the stock market, but has had better luck, according to figures supplied by the publication. As of Sept. 30, Virginia's $ 41.7 billion fund consisted of 70 percent stocks and 30 percent fixed income. The chairman of Virginia's pension fund advised the fund's manager to cut the state's stock market holdings to 50 percent, as Delaware has done.
Maryland's Sen. Barbara A. Hoffman, chairman of the Budget and Taxation Committee, said she wants Mr. Dixon to explain the fund's investment policies. "It is a problem, because you can't run it by the seat of your pants. It's too much money," the Baltimore Democrat said.
Mr. Dixon defended his policy of keeping a large percentage of the state's investments in the stock market. "This is the time to be holding our position in stocks. You don't want to sell when things are down." He said the state's fund has performed better than the Dow Jones Industrial Average and the S&P; 500.
"We're not down anywhere near as much as the market's down because we're diversified," Mr. Dixon said.
The fund will likely need between $55 million and $68 million from the state to keep operating. The exact amount will be determined in December by the pension system's trustees, he said.
Mr. Dixon said the payment is not optional. "This has to be done," he said.
Gov. Parris N. Glendening will not comment on the payment until its amount is determined, spokesman Michael Morrill said. "The budget will be based on December numbers and that's what we'll be looking for," Mr. Morrill said.
Mr. Dixon said he believed the state would be able to make the additional payment from the Rainy Day Fund of nearly $1 billion. Word of the pension-fund losses comes as state officials are working to make up a projected $521 million shortfall in Medicaid and other health programs.
Decreased tax revenue from the slowing economy has put an additional strain on the state's $21 billion budget, and state officials expect even less money to come in because of the economic fallout from the Sept. 11 attacks.
Mr. Dixon said the additional pension contribution next year will reverse a five-year trend of diminishing state payments into the pension system. The stock market boom of the late 1990s gave the fund healthy earnings, including an increase of 12 percent in 2000.

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