PRELIMINARY FY 2017 STATE CONTRIBUTION SET AT $3.9 BILLION
SPRINGFIELD, IL – While the funded status of Teachers’ Retirement System improved slightly during fiscal year 2015 to 42 percent – up from 40.6 percent a year earlier – TRS still faces serious long-term financial problems caused by a long-standing unfunded liability.
The funded ratio is calculated according to state law, which requires TRS to average, or “smooth,” its investment gains and losses over a rolling five-year period; a common actuarial practice.
When calculating the funded ratio based on the fair market value of TRS assets, the System’s funded status declined from 44.2 percent in FY 2014 to 42.9 percent in FY 2015.
“The bottom line is TRS still has less than 50 cents on hand for every dollar that is owed to our members, including members that already are retired’ said TRS Executive Director Dick Ingram. “That cannot continue.
“Our disciplined investment program delivers top quartile returns, but as successful as we’ve been, we cannot invest the System out of a problem created by decades of underfunding by state government,” Ingram added. “The money TRS owes its 400,000 members is a debt that is not going to go away. There needs to be a stronger commitment by the state to fully pay the promises made to our members over the last 76 years.”
Despite the improvement in the System’s official funded status, the total accrued liability of TRS rose during FY 2015 from $103.7 billion to $108.1 billion. The System’s unfunded liability increased from $61.5 billion at the end of FY 2014 to $62.7 billion at the end of FY 2015.
Following the annual actuarial valuation report from the TRS actuary, Buck Consultants of Chicago, the TRS Board of Trustees gave preliminary approval to a state government contribution for fiscal year 2017 of $3.986 billion, which is a 6.5 percent increase over the current budget year’s state contribution.
The $3.9 billion preliminary contribution for FY 2017 is based on calculations dictated in state law and falls well below the amount of money actuaries estimate state government should be paying TRS based on standard actuarial practices. Evolving actuarial standards indicate the state’s annual contribution to TRS should be $6.07 billion.
Of the $3.9 billion state contribution for FY 2017, only $871 million is needed to pay the anticipated annual cost of TRS pensions during the year. The remaining $3.1 billion is dedicated to help paying off the System’s unfunded liability…
From the Teachers Retirement System of Illinois Press Release, October 30, 2015