101 Federal Street, Suite 1900
Boston, MA 02110
Standard and Poors
55 Water Street New York, New York 10041
One State Street Plaza, New York, NY 10004
Dear Sirs: You are promising to report on States. New York State is liable for its Pension funds' losses and underfunding. This is to inform you that NY State Pension Funds have estimated losses of approximately $7.3 trillion dollars and NYS's assumption of a safe return of 7% can only be characterized as a fraud. It is not possible for NYS to fund its Pension obligations and/or losses through taxes or by changes in employee contributions which are contractually determined, because of the NY State Constitutional Provision copied here:
#7. After July first, nineteen hundred forty, membership in any pension or retirement system of the state or of a civil division thereof shall be a contractual relationship, the benefits of which shall not be diminished or impaired. (New. Adopted by Constitutional Convention of 1938 and approved by vote of the people November 8, 1938.) Note that Andrew Cuomo is making no efforts to amend the NY Constitution in regard pensions.
In regard to New Jersey, it was reported that, "to justify an 8.25% interest assumption assets were in investments that could possibly generate that return so, as of May 31, 2011, the plan’s $74.7 billion was allocated 27% in domestic equity, 30% in bonds, 20% in international equity, and 17% in alternative investments. With only about $300 million in employee contributions coming in over the last two months, while $1.3 billion in payouts left on top of this 10%+ investment drop the plan likely has about $65 billion this morning." In New York State things are worse, because of NYS Constitutional restrictions on Pension Changes and the trillions of dollar size.
The NYS Comptroller reports:
The following table summarizes the market values for March 31, 2010 and 2009 (In Thousands):
Asset Type 3/31/2010 Market Value %of total
Domestic Equity $ 51,495,373 38.9%
International Equity 21,178,608 16.0
Private Equity 12,799,735 9.7
Absolute Return Strategy 3,817,538 2.9
Real Estate 5,551,078 4.2
Core Fixed Income 33,726,066 25.4
Mortgage Loans 845,721 0.6
Short-term Investments 3,086,085 2.3
Total Investments $ 132,500,204 100.0%
Market losses have exceeded 10% in both domestic and international equities with estimated losses of $7.3 trillion dollars for NYS's portfolio. Real Estate is substantially decreasing in value in NYS. Get a good laugh at the 119 page long list of funds held by NY State and ponder how the NY State Comptroller can keep tabs on such a large number of funds.
Annualized Rate of Return
1 Year 3 Years 5 Years 10 Years
Total Fund 25.87% -1.68% 4.16% 3.75%
Domestic Equity 51.70 -4.10 2.20 0.52
International Equity 56.77 -5.00 5.52 2.72
Private Equity 11.61 2.40 12.82 8.56
Strategy 14.95 -0.44 3.29 —
Equity Real Estate -27.77 -17.65 -0.11 9.56
Core Fixed Income 7.92 7.00 6.06 7.57
Indexed Securities 5.01 5.75 4.34 —
The Core Fixed Income and Treasury Inflation Indexed investments cannot expect to earn anywhere near the 7% assumption. In its latest action, the Federal Reserve has frozen interest rates for the next two years and 10 yr Federal returns would be for the next two years at 2.14%, not 7.0%.
Bottom line is New York State has an estimated $7.3 trillion dollars in Pension losses and no possible way to fund them, nor to earn 7.0% safe return with 10 yr. Treasuries at 2.14%. Please read my prior post New York State Rating Downgrade: Who'll Repay The Bonds As Taxpayers Flee? concluding with, Who'll repay the bonds?
As you, the rating agencies, may note in the new law suit against Bank of America, there will be consequences for those not reporting truthfully. Please also be aware of Federal Law Title 18 as to who may be charged in a federal criminal action.
TITLE 18 PART I CHAPTER 1 #2. Principals
Whoever commits an offense against the United States or aids, abets, counsels, commands, induces or procures its commission, is punishable as a principal.
Whoever willfully causes an act to be done which if directly performed by him or another would be an offense against the United States, is punishable as a principal.
P.S. Please access website for working links to all data.