The state's pension funds have nose-dived by an unprecedented $1.7 billion over the past six months, following the path of other funds and stock markets worldwide and leading state financial planners into uncertain territory.
The state's investment director, Carroll South, said the 22 percent drop in value is the largest the funds have ever had.
But despite the funds' plunge in worth, he said, it is too risky to make any immediate changes in the state's investment portfolio, given the volatility of the markets.
"Simply because diversification hasn't worked over the course of the last six months of this year doesn't mean it won't work," South said, noting that spreading assets across a mix of holdings has been the preferred manner of minimizing risk for the last 70 years.
Likewise, the governor's budget director said it is premature for his office to make any recommendations about how to respond to the decline in fund values.
"We don't want to do things in a trough," said David Ewer, state budget director. "We want a chance to see what does recovery look like."
Ewer also emphasized that the financial slide is not unique to Montana's pensions, but part of a "global economic meltdown" that has eliminated all safe places for investments.
But standing still in the middle of what is likely the state's largest fiscal crisis on record is not a plan of action, said Republican Sen. Dave Lewis, a former state budget director who now represents Helena in the legislature.
"It's irresponsible to ignore the fact that we've had a close to two-and-a-half billion dollars change in valuation," Lewis said.
From a high point in October 2007, the funds have decreased in value by about $2.2 billion.
"We need to look at what we've got, what we've done, how we got here and what we're doing in the future," Lewis said.
Many other states have experienced rapidly falling pension valuations over the last year as well.
"For the public pension communities as a whole the losses have been in the hundreds of billions," said Keith Brainard, research director for the National Association of State Retirement Administrators.
A recent study by the Center for Retirement Research at Boston College estimates the total decline in equity value for state and local governments' benefit plans at about $1 trillion, between the market high point in October 2007 and October 2008.
For Montana, and for other states, the pension fund free fall could ultimately mean that taxpayers will have to bail out the system, Lewis said. Given that possibility, he said, legislators have a critical role to play in deciding how to proceed.
Any change in pension benefits to current state employees is prohibited by the Montana Constitution, and state financial planners say payout reductions will never happen.
But they are urging caution in the midst of a crisis that has national scope and no recent precedents.
"We need to have some time, I think, all of us," Ewer said. "Every American needs some time to see how this recovery shakes out."