Down markets impact Illinois' investment returns for poorly funded public pensions

[June 13, 2022]  By Andrew Hensel | The Center Square

(The Center Square) – As Americans deal with 40-year-high inflation and a stock market that has seen multiple down weeks, one expert says there's a direct affect on Illinois' pension systems.

The U.S. stock market has seen downward trajectory over the last several months. For ten of the past eleven weeks, the Dow has been down. The S&P and Nasdaq had their ninth down week out of the past 10.

Illinois' public sector pension system is partially funded by the investment returns in certain stocks and bonds. As the U.S. stock market struggles, so too does the Illinois' pension system – and pension systems nationwide.

Bill Bergman, instructor of finance at the University of Loyola Chicago, said the system is in a worse position now than at the beginning of the year.

"The state's investments have performed very poorly over the last six to eight months," Bergman said. "As a result, the pension plan is in much worse condition than it was eight months ago."

The state also has among the most unfunded pension liability in the nation. A recent report from the American Legislative Exchange Council shows Illinois has $533 billion in unfunded liability. Nationwide, the number is $8.2 trillion. This leaves many Illinois workers with underfunded pensions.

"The teacher's retirement system and other big pension funds in Illinois are sorely underfunded, relative to what they should have to fulfill these long-term promises that our government has given to these employees," Bergman said.

Adam Schuster, senior budget and tax research director at the Illinois Policy Institute, told The Center Square that taxpayers will continue to be affected by the state's broken pension systems.

"If there is a gap between how much the employee puts into their pension and how much they are promised, 100% of that burden will fall directly on the taxpayers," Schuster said.

The ALEC study showed Illinois' unfunded pension liability per capita at over $41,656 per person.

Andrew Hensel has years of experience as a reporter and pre-game host for the Joliet Slammers, and as a producer for the Windy City Bulls. A graduate of Iowa Wesleyan University and Illinois Media School, Andrew lives in the south suburbs of Chicago.