State pension fund warns of higher costs

The state pension fund serving teachers and other school employees lowered its official expectations for investment returns, a move that could increase costs for school districts in the coming years.

The board of trustees for the Public School Employees' Retirement System, or PSERS, on Friday reduced its assumptions for the annual rate of return on its billions of dollars in investments.

The rate dropped to 7.25 percent, down from 7.5 percent, making the public pension fund one of the more conservative funds in the country.

The new assumption will be used to make actuarial valuations for fiscal year 2016, which ends June 30, said Evelyn Williams, a spokeswoman for the system.

"We don't have the final impact yet," she said regarding the fund's unfunded liability, which was $37.3 billion at the end of the 2015 fiscal year.

The actuarial valuation for 2016 will be presented in December when the employer contribution is set for the fiscal year starting July 1, 2017, Williams said.

Projections show that the 7.25 percent assumption may lead to a small increase in projected employer contributions. The estimate is less than 0.2 percent over the next six years, according to PSERS.

PSERS had an assumed rate of return of 8.5 percent in 2007. The fund has reduced that rate four times since 2007.