A writer must “know and have an ever-present consciousness that this world is a world of fools and rogues… tormented with envy, consumed with vanity; selfish, false, cruel, cursed with illusions… He should free himself of all doctrines, theories, etiquettes, politics…” —Ambrose Bierce (1842-1914?). “The nobility of the writer's occupation lies in resisting oppression, thus in accepting isolation” —Albert Camus (1913-1960). “What are you gonna do” —Bertha Brown (1895-1987).
After the election, what’s next for teacher pensions? by TRS Executive Director Dick Ingram
elections are over and everyone is wondering the same thing about Illinois
government: “What’s next?”For
Teachers’ Retirement System and its 366,000 members, that question will
continue to focus on what must be done to ensure the long-term financial future
of TRS, as well as the other state pension systems.
now and January 9 – when a newly-elected General Assembly convenes – teachers
across Illinois are anticipating that legislators will renew a contentious
debate about the future of TRS and possibly take action to overhaul the
System’s financial structure.
latest audited financial report shows that TRS is a strong retirement fund – in
the near term. The System accumulated $3.7 billion in revenue during fiscal
year 2012 and ended September with $37.5 billion in assets. TRS paid more than
$4.5 billion in benefits last year. For now, teacher pensions are secure.
long-term sustainability of TRS, however, remains uncertain due to the overall
bleak fiscal condition of the State of Illinois. The state’s debts that are
expected to surpass $37 billion in 2017 and there are no plans in place to
successfully meet that burden. Illinois is further tested by an underperforming
economy that creates significant political and fiscal challenges which inhibit
future these factors will increasingly undermine the state’s legal
responsibility to fully fund teacher pensions annually and to keep retirement
promises to TRS members that were first established in 1939.
the backdrop of these difficulties, TRS has issued blunt warnings about the
serious consequences of two fiscal trends on a collision course: One, the
state’s pension debt is growing faster than state revenues. Two, state
government has continually failed to provide actuarially-adequate funding to
stabilize that pension debt, much less to pay it off.
$37.5 billion in assets, TRS at the end of FY 2012 had only 40.6 percent of
what will be needed to pay all anticipated benefits over the next 30 years.
When you combine TRS with the state’s other pension systems, Illinois has the
worst-funded major pension system in the country. No other state even comes
close. TRS’s unfunded liability alone stands at $52 billion. This means that we
have only half of the assets needed to pay the benefits due to our members who
already are retired.
with this warning, the TRS Board of Trustees acknowledged the harsh reality
that TRS will be insolvent in the future unless changes are made to stabilize
the System. The trustees established a five-point foundation for any future
reform. These five cornerstones are:
·Require the use of standard actuarial practices and formulas to
determine funding levels instead of alternate calculations required by state
law that artificially lower state contributions. For example, the state’s
required contribution to TRS for fiscal year 2014 under state statutes is
nearly $1 billion less than the actuarially determined amount, and this only
exacerbates the unfunded liability.
·Require a guarantee in law ensuring that state government fully
funds the state’s public pension funds in the future; reversing years of
lower-than needed contributions. Without a guarantee the current problem will
just grow bigger.
·Fix a serious financial inequity in the funding and benefits for
Tier II members hired after January of 2011. Current pension law significantly
penalizes Tier II members and creates future funding imbalances that will run
into the billions of dollars.
·Require that any changes enacted in the pension code be
straightforward and avoid complications that unnecessarily slow the
administration of benefits so we can apply them fairly to all members. This
kind of transparency will help restore the trust that has been eroded by
decades of broken funding promises.
·Require that any changes to the pension code adhere to Article 13,
Section 5 of the Illinois Constitution – the pension protection clause. While
the question of constitutionality is ultimately decided by the courts, all
reform efforts must start by meeting this standard.
to act on the state’s pension problems is as urgent as ever. TRS members and
the taxpayers of Illinois deserve a solution that puts the System on permanently
sound financial footing.
next? The problems facing TRS and the state’s pension systems can be fixed.
Unfortunately there are no magic answers awaiting discovery. Many other states,
all in far better fiscal circumstances than Illinois, have responded to similar
pension challenges by making tough decisions to ensure the future viability of
their retirement systems. Illinois has not. Any change in Illinois will require
similar tough decisions from everyone. Continued inaction will just make these
decisions more difficult in the future.
TRS is a
promise keeper. Our fiduciary duty to uphold the System’s long-term stability
means we must ensure that retirement promises are kept not only for those
already retired, but for veteran teachers in the midst of their careers as well
as new teachers just starting out.
worked hard over the last several years to ensure that state officials and
legislators have the data and sound analysis necessary to make these decisions.
We have framed the issue and outlined the consequences.What’s next? It is time to answer that question.