Officials say previous gains should help state programs
MONTGOMERY — Alabama is taking a hit from the nation's financial crisis, which has lowered the value of its state pension fund, reduced earnings in a plan to send students to college and eaten up more than $100 million of a state budget that pays for prisons, state troopers and Medicaid.
But state officials said the long-term financial outlook of these government operations is still sound.
The most obvious impact could be to the Retirement System of Alabama. The pension fund's values are down 8 percent to 12 percent because of the turmoil on Wall Street. The pension funds total about $32 billion.
But the RSA's chief executive officer, David Bronner, said the Alabama fund is in better shape than most because of a conservative and diversified investment plan. RSA has invested in or owns golf courses across Alabama, newspapers and broadcast stations and even a large New York City office building.
"The different investments help in a huge way," Bronner said.
He also said the losses this year follow the RSA's gains of about 17 percent the previous year.
Also helping is that Alabama has very little invested in mortgages, the source of much of the financial turmoil, Bonner said. RSA got out of the real estate market in the 1980s after losing money when many homeowners rushed to refinance their mortgages, he said.
Meanwhile, state Treasurer Kay Ivey said two programs to help families save money to send their children to college have dropped 7 percent, but over the past five years showed gains ranging from 9.9 percent to 17 percent.
The programs are the Prepaid Affordable College Tuition Plan, which allows parents to put money into the plan's investment portfolio when a child is young to pay for four years of college tuition in the future, and the Alabama Higher Education 529 Fund, which allows parents to invest money and use the proceeds to pay college expenses.
