SPRINGFIELD – The Illinois teachers’ pension fund is owed $71.4 billion, and the state will be expected to increase its contribution by 14.5 percent in fiscal year 2018.
The Teachers’ Retirement System of the State of Illinois announced Friday it had given preliminary approval to a contribution request for $4.56 billion to its pension fund.
The changes in state law made last year for determining actuaries’ estimates for adequately funding pensions have greatly increased the amount of contributions statewide.
The Teacher’s Retirement System said of the projected $4.56 billion contribution, just $974 million is needed to pay the cost of pensions for that year. The remaining $3.5 billion is to go toward the amount owed from previous years.
“Most of the fiscal year 2018 contribution is a self-inflicted wound,” TRS Executive Director Dick Ingram said. “That money could be spent on other priorities today if the state of Illinois had fully met its obligations in the past.”
While next year’s contribution to the teachers’ pensions is an eye-popping figure, it is far short of the actuaries’ ceiling. Using the new accounting standards, the state’s annual contribution should be $6.88 billion to catch up with its unfunded liability.
“By any measure, $4.56 billion is a lot of money, but that amount is a direct product of the perpetual underfunding of TRS by state government over the last 76 years,” Ingram said.
Making the situation worse is the continued sluggish performance of pension funds’ investment returns. Upon the advice of the actuaries, the projected rate of return was dropped from 7.5 percent 7 percent in August.
“Pension math is unforgiving – TRS and other pension systems across the country are lowering their assumed investment rates because all indicators point to slowing returns in the future,” Ingram said.
The investment rates also were lowered in 2014 and 2012, and those numbers will be revisited each year.
TRS membership doesn’t include Chicago teachers. That city’s educators belong to the Chicago Teachers’ Pension Fund, which has more than 63,000 members, and pays out nearly $1.3 billion in benefits annually. The pension is largely funded by Chicago public schools.
Illinois law requires that TRS annually provide the state with an estimated pension fund contribution by Nov. 1. The state actuary must review the calculations, and if approved, the TRS board will give its final approval to the request early next year.
The Teachers' Retirement System of the State of Illinois is the 37th largest pension system in the nation. It provided retirement, disability, and survivor benefits to teachers, administrators, and other public schools personnel employed outside of Chicago. The system has 406,855 members, and reported assets of $45.6 billion as of Sept. 30, 2016.