Scope of Illinois pension funds’ impact from recent bank turmoil unclear
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[March 17, 2023]
By Greg Bishop | The Center Square
(The Center Square) – It’s unclear how far-reaching recent bank failures
are for various pension funds in Illinois, but one lawmaker is ringing
the alarm that the state is one deep recession away from insolvency.
Sunday, the federal government took over New York Signature Bank. Days
before, Silicon Valley Bank collapsed. While President Joe Biden
announced depositors will be made whole, he said investors will lose
out.
Of several pension funds messaged for comment on liabilities in troubled
banks, the Illinois Municipal Retirement Fund said it's impacted by
about $3 million from SVB.
“While we are always concerned about any losses, for context, IMRF holds
about $49 billion in assets,” IMRF Communications Officer John Krupa
said. “So these shares make up a very small part of our total portfolio
– about 0.006% (a fraction of a percent).”
IMRF is the retirement fund for non-fire and police municipal employees
across the state. The fund said members, local governments and taxpayers
should know the fund is strong.
“We are about 98% funded, which makes us one of the best-funded public
pensions in the nation,” Krupa said. “Any potential losses associated
with SVB Financial Group will have no impact on IMRF’s ability to pay
benefits. We will continue to monitor the situation closely and adjust
in accordance with our investment policies.”
The Illinois Police Officers’ Pension Investment Fund says it had
minimal exposure to the SVB, Signature Bank and Silvergate turmoil.
“[A]s of Feb 28, 2023, our exposure to SVB Financial Group, Signature
Bank and Silvergate Capital Corp was minimal,” CIO Kent Custer said.
“Totaling $1.2 million, the investments represented 0.014% of the
IPOPIF’s total asset value of $8.9 billion.”
Illinois state Rep. Steven Reick, R-Woodstock, said while recent U.S.
bank problems may “hit” pensions, what happens in Europe could be the
“real canary in the coal mine.”
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“When the Saudis pull their funding from Credit Suisse, how many other
European banks have got similar arrangements with these oil nations, and
if they pull their funding for whatever reason, we’re going to have a
European bank crisis and that’s going to translate over to here,” Reick
told The Center Square. “That is the bigger problem.”
The House Personnel and Pensions Committee heard testimony from various
union representatives and government officials about pensions. Some were
looking to increase the cost of living allocation for pensioners, others
were looking to address problems they said are there for Tier II
pensions, which are fewer benefits than Tier I for public employees
hired before 2011.
State Rep. Stephanie Kifowit, D-Oswego, chairs the committee. She said
they’re hearing everyone out.
“So for the fiscal stability for the state of Illinois, this is an issue
that I’m committed to making sure that we have a suitable and a strong
policy to fix this problem,” Kifowit said.
Reick said Illinois is “walking on eggshells” with unfunded liabilities
around $140 billion for state funds. Something drastic needs to be done,
he said, like Congress expanding bankruptcy for states. That would allow
an override of the Illinois Constitution’s pension protection clause,
Reick said.
“There are only three ways we’re going to fix our pension problems, it’s
going to be revenue increase, benefit cuts or a complete collapse of the
system,” Reick said.
If nothing is done except bringing in more tax dollars, Reick said the
state won’t be able to continue providing essential services as nearly a
quarter of every tax dollar collected goes to pension costs.
Reick said there has to be a “grand bargain” to address Illinois’
unfunded pension liabilities, which are among the worst in the nation.
He suggests before the bottom drops out, there needs to be a combination
of benefit reductions and revenue increases.
Greg Bishop reports on Illinois government and other
issues for The Center Square. Bishop has years of award-winning
broadcast experience and hosts the WMAY Morning Newsfeed out of
Springfield.
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