Illinois has not paid what it owes its five pensions systems, and it’s unlikely lawmakers will want to pay any more than they have to in the future.
“One-hundred-percent funding is impossible,” said state Sen. Pam Althoff (R-Crystal Lake). “As much as anyone would like to fully fund the pension systems, it is just not practical and [is] impossible to implement.”
A new report from the Illinois Auditor General’s office suggests lawmakers fully fund two of the state’s five pension systems—the Teachers’ Retirement System and the State Universities Retirement System. The report suggests leaving the State Employees Retirement System, the General Assembly Retirement System, and the Judges’ Retirement system with a target of 90 percent funded.
Although the audit report released December 31 suggests fixes to the beleaguered pension systems, the Illinois Auditor General cannot compel lawmakers to take action.
State law calls for 90 percent funding for all five systems by 2045, but the auditor general’s report suggests 100 percent funding within 30 years for TRS and SURS.
To fully fund the pension systems by 2032, Illinois lawmakers would have to spend more money, and more quickly, than they were planning, though no one knows for sure how much money would be needed.
Althoff, however, notes Illinois has many other needs than just paying the retirement costs of public employees.
“We have less and less money and more and more demands to spend what little we have left,” Althoff said.
Dave Urbanek, spokesman for TRS, said the managers of the teachers’ pension system have pushed for 100 percent funding in the past, only to be ignored by lawmakers.
“We have to follow state law, and right now the law says 90 percent funded by 2045,” Urbanek said. “Our trustees have asked several times to be more like the actuarial tables used by the rest of the world.”
State Rep. Dan Biss (D-Evanston) said he has a pension reform proposal that includes a move to fully fund the pension systems, but he admits it would be an expensive undertaking.
“There is no specific number; it is a real cost,” Biss said. “Fully funding the pension systems will not be affordable without the benefit reforms in our plan.”
Biss and fellow Democratic State Rep Elaine Nekrtiz from Northbrook have written a plan that would lower cost-of-living increases, raise the retirement age, and require public employees or local school districts to pay more into the pension funds.
“I have been surprised how little the cost of moving to a fully funded [pension system] really is,” Biss said.
The auditor general’s pension report also looks at Illinois’ assumed rate of return on the investments for the five pension systems, saying all five are “reasonable” for now. But the report suggests each pension system lower its expected rates of return.
Benjamin Yount ([email protected]) writes for IllinoisWatchdog.org. Reprinted with permission.