PROVIDENCE, R.I. (WPRI) – The shortfall in Rhode Island’s two largest state pension funds has jumped by 15% after officials adopted more conservative assumptions about future investment returns.

A new valuation by the state’s actuarial firm shows the combined unfunded liability in the funds for state employees and teachers was $5.3 billion as of June 30, up from $4.6 billion a year earlier under the old assumptions. Their funded ratios fell to 52.9% and 54.8%, respectively, from 56% and 58.3%.

The projected taxpayer contribution to the pension funds in 2019-20, the first budget year when the new assumptions will have an effect, will rise to about $465 million, up from $442 million in 2018-19. The funds cover benefits for more than 53,000 retirees and active workers.

Last May the State Retirement Board voted to reduce its forecast of how much the pension system’s investments will earn annually to 7% a year, down from the 7.5% forecast that had been in place since 2011. (The investments have earned an average of 7.1% a year since 1995.)

The actuarial firm, Gabriel Roeder Smith & Co., said that change as well as relatively weak earnings in some of the past few years were the main reasons for the increase in the shortfall.

The shortfall in the two pension funds is now expected to peak at $5.5 billion in the 2019-20 fiscal year, then gradually fall over subsequent years, according to the actuarial analysis. The state’s 2011 pension overhaul froze cost-of-living adjustments for retirees until the plans are 80% funded, which is expected to take another 10 years, the actuaries said.

General Treasurer Seth Magaziner, who oversees the pension system, last year announced he would significantly shrink the investments in hedge funds put in place by his predecessor, now-Gov. Gina Raimondo. Magaziner said last week the system had earned nearly 15% over the past year, bringing its total value to $8.34 billion.

“The health of Rhode Island’s pension fund is improving,” Magaziner, a first-term Democrat, said in a statement. “Over the past year, our Back to Basics approach of common-sense investing has been providing solid investment returns for our members.”

Among the roughly 10,000 retired Rhode Island teachers receiving a standard pension, the average beneficiary was a 72-year-old paid $44,565 a year, according to the actuaries. Among the roughly 9,000 retired state employees receiving a standard pension, the average beneficiary was a 74-year-old earning $32,127.Ted Nesi (tnesi@wpri.com) covers politics and the economy for WPRI.com. He writes Nesi’s Notes on Saturdays and hosts Executive Suite. Follow him on Twitter and Facebook