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City taxpayers will have to foot a tab of more than $1.5 billion because pension-fund investments in 2012 fell on their face, experts told The Post.
NYC’s $111 billion pension system earned a paltry 1.37 percent on investments in the last fiscal year under the direction of City Comptroller John Liu.
That’s way below the 8 percent a year the funds must earn, by state law. If they fall short, taxpayers have to plug the gap — with interest.
“We’re talking hundreds of millions in additional contributions,” said Charles Brecher, research director of the watchdog Citizens Budget Commission.
To start making up the 2012 shortfall, the city has already socked away $588 million for the three years from 2014 to 2016, said George Sweeting, deputy director of the Independent Budget Office.
But the extra payments would go on another three years and could easily exceed another $1 billion.
Liu’s office manages investments for the five pension boards covering teachers, cops, firefighters, transit, sanitation and other workers.
Last year, the city plowed $7.8 billion into the pension system — about 12 percent of the total budget. That’s up from $1.5 billion in 2001.
Overall, the 1.37 earned by pension funds fell below the 3.15 gain by the S&P 500 index over the same period.
“If you do worse than the stock market, something’s wrong,” said John Murphy, a former executive director of the New York City Employee Retirement System, the city’s largest pension fund.
The comptroller did poorly on US stocks, the largest type of pension investment. Liu cited earnings of 2.29 percent — significantly lower than the 3.84 percent return on the Russell 3000 Index, his annual report says.
But Brecher said the comptroller’s results overall are “ pretty close to market performance.”
“I wouldn’t say they did a stellar job or a terrible job,” he said. “They did about average.
Pension-fund earnings, which totaled $1.8 billion, were deflated by a reported $1.1 billion loss in the value of investments, including real estate, private equity and hedge funds, the report shows.
Despite the dismal results, Liu, a potential candidate for mayor, painted a rosy picture in a press release last July, when he overestimated the earnings at 1.7 percent, and trumpeted a “third consecutive gain.”
But the gains were 23.2 percent in FY 2011 and 14.2 percent in FY 2010, after an 18.3 percent plunge in the 2009 market crash.
A spokesman for Mayor Bloomberg, who has a chief pension investment advisor and appoints trustees to the pension boards, did not return a request for comment.