SPRINGFIELD,
IL – Decades of state government underfunding and weakening investment returns
led the Teachers’ Retirement System Board of Trustees to give preliminary
approval to a state government contribution for fiscal year 2018 of $4.56
billion – a 14.5 percent increase over the state contribution for the current
fiscal year.
The
FY 2018 contribution is derived from calculations dictated in state law and
falls $2.31 billion below the amount of money that actuaries estimate state
government should be paying TRS based on standard actuarial practices.
Evolving
actuarial standards indicate the state’s annual contribution to TRS for the
coming fiscal year should be $6.88 billion.
“By any measure, $4.56 billion is a lot
of money, but that amount is a direct product of the perpetual underfunding of
TRS by state government over the last 76 years,” said TRS Executive Director
Dick Ingram. “Illinois is reaping what it sowed. Decades of inadequate
contributions for TRS mean that now – when investment returns are not robust –
big contributions must be made to secure the retirement promises made to
generations of teachers.”
Of
the $4.56 billion state contribution for FY 2018, only $974 million is needed
to pay the anticipated annual cost of TRS pensions during the year. The
remaining $3.59 billion in the contribution is dedicated to help pay off the
System’s $71.4 billion unfunded liability.
“Most of the FY 2018 contribution is a self-inflicted
wound,” Ingram added. “That money could be spent on other priorities today if
the State of Illinois had fully met its obligations in the past.”
Another factor in the contribution increase was a reduction
in the TRS assumed long-term rate of investment return to 7 percent from 7.5
percent. The reduction in the assumed investment rate was made in August
following a recommendation by the TRS actuaries, Segal Consulting, of Chicago.
“An
inescapable result of lowering the assumed rate of return is an increase in the
state government contribution. Pension math is unforgiving. The benefits that
are promised must be paid for,” Ingram said. “TRS and other pension systems
across the country are lowering their assumed investment rates because all
indicators point to a slowing of investment returns in the future.”
He
added that TRS has revisited the rate of return assumption annually, reducing
it in 2012 and in 2014. The Illinois State Actuary also has recommended that
TRS review its assumed rate of return annually.
“TRS
did not rush this decision. This is a very thoughtful, staff-driven process,”
Ingram said. “The duty of TRS is to our members and the financial stability of
their retirement trust fund. We cannot ignore reality and the reality is
investment returns are slowing and we owe 406,000 members more than $118
billion in the future.”
Under state law, TRS must each year deliver a state
government contribution estimate by November 1 to state officials and the State
Actuary. The job of the State Actuary is to review the actuarial practices and
assumptions used to calculate the estimate and to determine whether the process
was done correctly. If the State Actuary approves of the System’s methods, the
TRS Board gives final approval to the contribution amount early in the next
year…
About
Teachers’ Retirement System
The Teachers’ Retirement System of
the State of Illinois is the 37th largest pension system in the
United States, and provides retirement, disability and survivor benefits to
teachers, administrators and other public school personnel employed outside of
Chicago. The System serves 406,855 members and had assets of $45.6 billion as
of September 30, 2016.
Retirement aside, please tell me how Rauner was able to give out $3,000 + bonuses to non-union government employees, for a total of around $4,000,000, and not only was there no outcry about this that I saw, but when we haven't paid so many of our State bills, how and where did he get the money from?
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