Saturday, May 30, 2020

As We Near the End of Fiscal Year 2020 for the Teachers’ Retirement System of Illinois by Bob Lyons






“Our pension system received a total state pension contribution of $4.81 billion for this current fiscal year, which is certainly a lot of money. Even more significant is that it is not a number that was arrived at by using what is called standard actuarial accounting.







“The contribution that we receive is based on state law, Illinois state law. Illinois state law dictates that pension contributions are to be calculated on a fifty-year timetable that began in 1995, not the thirty-year time table that almost every other pension system uses.

“State law also established a 90 percent funding target instead of the standard 100 percent goal that practically all other pension systems dictate. And lastly, Illinois requires the debt payments on state pension bonds to be deducted from future state contributions. That means, the billions borrowed by Governors Blagojevich and Quinn are repaid by money that should have been received by the TRS pension fund.

“As a result, the contribution of $5.14 billion which is what the Illinois Teachers’ Retirement System will receive for FY 2021 is not the amount that an actuarial standard study would call for, nor does it equal what the pension system is expected to spend in the year ahead. It does not in any way reduce the existing unfunded pension liability that is currently $78.2 billion. It will of course add to it.

“An actuary using standard accounting practice would call for a contribution $3.2 billion higher than $5.14 billion, a required contribution of $8.34 billion. And if the State of Illinois took ‘the long view’ and wanted to save money in the long run, that is what they would pay.

“But they certainly could not pay that amount because they do not have the $8.34 billion. If truth be told, they do not have the $5.14 billion. The only way they will come up with the ‘by-law contribution’ will be by borrowing a goodly portion of it.

“A loan that will be paid for from future contributions. There is an old adage that goes, ‘If you find yourself in hole, the very first thing you should do is stop digging.’ Sadly, when you have been digging the hole for 81 years that is all that you know.

“The Illinois Senate Bill 264 FY 21 appropriations budget passed both houses of the General Assembly this past weekend. Every Democrat attending the session voted yes and every Republican voted no. 

“The general revenue spending called for in the FY 2021 is a record $42.9 billion and has $8.6 billion in pension contributions to the three pension boards and the five separate pension funds with an additional $1.3 billion for retiree health costs and a $800 million payment for past pension bonds. As has been reported, the full state payment for TRIP/TRAIL is in the new budget” -Bob Lyons, former TRS Trustee and retired teacher



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