“The
Teachers’ Retirement System Board of Trustees this week reduced the State of
Illinois’ annual funding contribution to the System for fiscal year 2018 by
$530.8 million, reluctantly adhering to a new law that changes the statutory
pension funding formula.
“The
revised state contribution for TRS is now $4.034 billion. The previous FY 2018
contribution, certified by the TRS Board last October, was $4.564 billion. ‘The
changes enacted this year in the pension funding formula move TRS further away
from financial stability and continue to kick the can down the road. Period,’ said
Dick Ingram, executive director of TRS.
“‘Cutting
the state’s contribution only increases our concern that TRS will eventually
become insolvent.’ Ingram added that the System’s $71 billion unfunded
liability – one of the largest in the country – is a direct result of decades
of underfunding by state government.
“In FY
2018, the state’s contribution will fall $2.839 billion short of what the
System’s actuaries say is ‘full funding’ for the year or $6.873 billion. ‘For
every dollar that the state cuts from the TRS contribution now, they will have
to spend $3 down the road to replace that revenue because of the interest
costs,’ he said. ‘A $530 million funding cut today just puts off the inevitable
and will create a payment of $1.6 billion in the future.’
“A new
state law approved in July by the General Assembly changed the pension funding
formula in two significant ways that reduce the state’s allocation to the
System:
· TRS must retroactively ‘smooth’
the fiscal effect of any changes made in the TRS assumed rate of investment
return over a period of five years. The ‘smoothing’ applies to any assumption
changes from 2012 on.
· Local school districts will pay more
of the cost of a member’s pension if that member’s salary is equal to or
greater than the governor’s statutory salary of $177,412. The district will be
responsible for paying the actuarial cost of the benefits earned on the portion
of the member’s salary that exceeds $177,412.
“The new
state contribution does not include any potential cost savings from the
creation in July of the Tier III ‘hybrid’ retirement plan because Tier III is
still being developed. When Tier III will be implemented will be decided by the
Board at a future meeting.
“The TRS
Board is required each year to certify the state’s annual contribution to the
System for the next fiscal year. That contribution is reviewed by the State Actuary
before it is included in the state budget for the upcoming year…”
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 $48.6 billion as
of June 30, 2017
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.