Illinois governor's office warns of
crippling pension payment hike
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[August 24, 2016]
By Dave McKinney and Karen Pierog
CHICAGO (Reuters) - Potential action this
week by Illinois' biggest public pension fund could put a big dent in
the state's already fragile finances, Governor Bruce Rauner's
A Monday memo from a top Rauner aide said the Teachers' Retirement
System (TRS) board could decide at its meeting this week to lower the
assumed investment return rate, a move that would automatically boost
Illinois' annual pension payment.
"If the (TRS) board were to approve a lower assumed rate of return
taxpayers will be automatically and immediately on the hook for
potentially hundreds of millions of dollars in higher taxes or reduced
services," Michael Mahoney, Rauner's senior advisor for revenue and
pensions, wrote to the governorís chief of staff, Richard Goldberg.
When TRS lowered the investment return rate to 7.5 percent from 8
percent in 2014 the state's pension payment increased by more than $200
million, according to the memo.
Illinois' fiscal 2017 pension payment to its five retirement systems was
estimated at $7.9 billion, up from $7.617 billion in fiscal 2016 and
$6.9 billion in fiscal 2015, according to a March report by a bipartisan
The country's fifth-largest state's unfunded pension liability stood at
$111 billion at the end of fiscal 2015, with TRS accounting for more
than 55 percent of that gap. The funded ratio was a weak 41.9 percent.
An impasse between the Republican governor and Democrats who control the
legislature left Illinois as the only state without a complete 2016
budget. A six-month fiscal 2017 spending plan was passed in June.
Mahoney cautioned that "unforeseen and unknown automatic cost increases
would have a devastating impact" on Illinois' ability to fund social
services and education.
One of Rauner's top Republican legislative allies, Senate Minority
Leader Christine Radogno, urged the TRS board to delay a vote Friday to
give the public time to weigh in on its possible actions.
[to top of second column]
Bruce Rauner and his wife Diana attend an interfaith prayer service
at First Presbyterian Church in Springfield at an interfaith prayer
service at First Presbyterian Church in Springfield,
Illinois, January 12, 2015. REUTERS/Nancy Stone/Chicago
"This issue is important enough at the very least to put the TRS
board on notice we donít want them taking any action that could cost
taxpayers $200 to $300 million without appropriate scrutiny,Ē she
TRS spokesman Dave Urbanek said the pension system was not aware of
Mahoney's memo until Tuesday and that Rauner's office had requested
"information about the scenarios under consideration."
He added TRS did not offer "potential scenarios" either to the
governor's office or legislative leaders and noted the TRS board has
not yet discussed the matter.
(Reporting by Dave McKinney and Karen Pierog; Editing by James
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