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 When Illinois' five pensions systems earned nearly 13 percent on
their investments last year, Illinois taxpayers still made pension
payments that topped $6 billion. State taxpayers also ponied up the
dough when the funds earned less than 1 percent two years ago.
"The fundamental point of this is that there is a guaranteed rate
(for benefits) for public-sector workers," Ted Dabrowski, vice
president of policy for the Illinois Policy Institute told Illinois
Watchdog. "We have this system that guarantees benefits, yet we can
never put enough money into it to make it meet its requirements."
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UP AND DOWN: Illinois Auditor General Bill Holland's chart
tracks pension investment expectations. |
Illinois once again is looking at its pension investments after a
new report suggests the pension systems may be expecting too much
from their investments. Illinois Auditor General Bill Holland released a report that stating
the State University Retirement System and the State Employees'
Retirement System both should reduce expected return on investments
from 7.75 percent to 7.25 percent annually.
The report also suggests Illinois' largest pension fund, the
Teachers' Retirement System, lower its investment expectations from
8 percent. The report, however, does not say what the new rate of
return should be.
TRS spokesman Dave Urbanek said teacher pension managers are
comfortable with an 8 percent expectation.
"The TRS actual rate of investment return for the last 30 years was
9 percent," Urbanek said. "The vast majority of large public pension systems
studied annually by the National Association of State Retirement Administrators
have an assumed rate of return of 8 percent."
But Dabrowski said just because everyone is expecting too much, does
not make it a good idea. "We saw what happened the last
few years when the markets tanked," Dabrowski said. "What happens is, if there is not enough money in
the system, the state looks at the pension fund and says we don't
have enough, we've got to get taxpayers to put in more."
[to top of second column] |
 In other words, taxpayers pay up when expected investments fall
flat.
And taxpayers also will pay if the pension systems lower their
investment expectations.
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EITHER WAY, TAXPAYERS PAY: Nekritz says taxpayers pay if
pension investment expectations are lowered. |
"When you decrease the rate of return, you increase the unfunded
liability," state Rep. Elaine Nekritz, D-Northbrook, said. "In order
to pay off (the unfunded liability), the state would have to pay
more." Nekrtiz, who co-authored Illinois' recently approved pension
reforms, said lower investment expectations also force the state's
annual pension payment to increase. When the Teachers' Retirement System lowered its investment
expectations two years ago, the teachers' pension payment
immediately jumped $300 million.
Nekrtiz did not have a price tag for how much Illinois' pension
payment or pension debt would increase if the pension systems
lowered their expectations in line with Holland's report.
But Illinois taxpayers are on the hook for at least a $7 billion
pension payment in the next budget.
Dabowksi said the only way to break the cycle of boom and bust is to
end Illinois' defined-benefit pensions and move public employees to
a 401(k)-style retirement plan.
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Contact Benjamin Yount at
Ben@IllinoisWatchdog.org and find him
on Twitter:
@BenYount.
[This
article courtesy of
Illinois Watchdog.]
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