For the past 20 years, the State Comptroller’s office has assumed that the state’s pension fund investments would grow at 8 percent annually, with every penny needed to keep up with New York’s soaring pension costs.

During the ’90s boom, those growth expectations were met and often exceeded. But over the past decade, the stock market has risen and plummeted twice, resulting in an average annual pension fund growth of only 3.75 percent, according to numbers from the comptroller’s office.

In response, New York is one of the states where questions are being raised about whether pension fund managers should scale back those expectations. And so far in this year’s comptroller’s race, with pension investments a major focus, the specific topic of fund growth has become a point of contention.

Former hedge fund manager Harry Wilson, the Republican nominee, dismissed the idea of an 8-percent growth rate as unrealistic, claiming that it should instead be around 6 percent, closer to the current expected pension fund growth in the business world.

To get the fund returns to that 6-percent level, Wilson said he would change the make-up of the state’s pension fund, shifting the portfolio into lower-risk investments, such as low-yield bonds with more consistent rates of return. Wilson argues that the comptroller’s office had included too many higher-risk equities in their portfolios, leading to the volatility of the pension fund, which dropped and then rose 26 percent the past two years.

The other problem with expecting an 8-percent growth rate, Wilson said, is that taxpayers are asked to foot the bill to pay for the state’s ballooning pension costs. Meanwhile, when there was surplus in the fund during the years when the economy was surging, public-sector unions were given sweeter contracts.

“Most states have it in the 7- or 8-percent range, but they’re all performing the same accounting trick,” Wilson said.

Pension fund managers around the country have been reluctant to lower expectations for growth, since doing so would cause the state’s future liabilities to explode. Billions of dollars in future pension costs would suddenly have no expected assets to back them. But Wilson said the state might as well be realistic about the recent decline in returns.

Wilson acknowledged that in order to make up the differences in growth, county governments and state employees would either have to foot more of the bill for their pension costs, or public-sector union employees would need to receive less generous benefits.

Notably, the contracts for both the Civil Service Employees Association and the Public Employees Federation are set to expire next year, at the same time Wilson would take office were he to win in November.

Wilson said resetting the growth expectations would give the next governor a weapon in negotiating the new contracts.

“In order to have an honest negotiation, you need to know the facts,” he said.

But Robert Whalen, a spokesman for State Comptroller Thomas DiNapoli’s office, said that Wilson’s position was really a political ploy to privatize the pension fund. Whalen said that decreasing the expected growth of the pension fund to 6 percent would put an onerous burden on taxpayers to make up the difference in the money necessary to pay out pension benefits.

Currently, state workers have a more generous defined-benefit plan. Whalen said Wilson’s plan could create momentum for the state to switch to defined-contributions plans, or 401(k)s. While these plans might be popular on Wall Street, Whalen said, lower-paid state workers deserve a more generous pension.

“The goal in our society is for people to have productive careers, and that when they get older, they’re not going to starve,” Whalen said.

Despite the fund’s stagnation over the past decade, over the past 20 years the average growth rate of the state’s pension fund has still been 8.75 percent, Whalen noted.

According to a 2010 study conducted by the Pew Center on the States, a non-partisan D.C.-based think tank, at the end of fiscal year 2008—before the worst of the recession hit—New York had the best-funded pension system in the country.

Whalen also noted that the passage of Tier V pension reform last year would decrease the state’s future pension liabilities, which he said was a more commonsense way to reduce pension costs than privatizing the system.

Keith Brainard, research director for the National Association of State Retirement Administrators—a non-profit group of private-sector companies that work with public-sector retirement funds—said one problem with Wilson’s approach could be that current taxpayers might overpay for future pension costs if the fund’s growth actually exceeds 6 percent.

With all the variables in play, Brainard said, there is no clear answer about whether adjusting the expected growth rate would have any of the effects predicted.

“You could put a group of the world’s greatest investment experts in the same room,” he said, “and there wouldn’t be any type of consensus.”