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A year older, deeper in debt

Investments do well, but pension debt rises anyway

Published: Friday, Nov. 8, 2013 1:15 a.m. CDT
Illinois Senate President John Cullerton, D-Chicago, speaks to reporters in Springfield, in a photo from August. Cullerton said in October that the state’s nearly $100 billion pension shortfall isn’t as dire as some people say, and that it is not an imminent crisis.

Even good Illinois state pension news isn’t all good.

When it comes to public pensions, the state and the taxpayers just can’t win.

That unfortunate reality was reaffirmed recently when the state Teachers’ Retirement System released a summary of its financial status for the 2013 fiscal year, which ended June 30.

TRS generated a positive return of 12.8 percent on its investments, an excellent rate that exceeds its projected 8 percent long-term rate of return.

At the same time, however, TRS’s unfunded liability for the 2013 fiscal year increased to $55.73 billion from $52.08 billion the year before.

In other words, it ended up another $3 billion in the hole despite out-performing its projected gain on investments.

These kinds of numbers provide additional proof, assuming that more proof is necessary, that Gov. Pat Quinn and legislators need to cobble together some kind of meaningful fix to the state’s overall $100 billion underfunding of its public pension systems.

TRS has 390,000 members. Of that total, 108,000 people receive benefits while another 160,000 are paying into the system. Another 120,000 members are inactive, meaning that they retain the right to future benefits while not currently contributing to the system.

TRS assets totaled $40.97 billion at the end of September, an astonishing sum. But it paid out nearly $5 billion in benefits in the 2013 fiscal year.

TRS’s problem is well-known to all who are paying attention. Its members have paid in what they were supposed to pay in. Investment returns have been good, an average 9 percent rate of return over the past 20 years. But past governors and legislators have repeatedly dropped the ball by declining to meet their public duty and spending money that should have been used for pension contributions on other programs.

But there is no easy solution. In the current fiscal year, the state is contributing $3.438 billion to TRS, and next year it’s scheduled to put in $3.412 billion. Urbanek said the state would have to put in $5 billion just to keep the current underfunding level where it is now.

So state officials must either put limits on what’s going out of TRS, put more into TRS or some combination of the two.

State Sen. John Cullerton, president of the Illinois Senate, recently said the state’s pension problem is not a crisis, and it’s not in the sense that TRS won’t be able to meet its obligations to retirees for the foreseeable future.

But the numbers show the state is sitting on a time bomb. If it ever goes off, there will be no shortage of casualties.

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