Teachers’ Retirement System to ask for $350 million more in next state budget
SPRINGFIELD (Illinois News Network) — Not enough money from the state or unaffordable benefits, there’s a difference of opinion as to why the Illinois Teachers’ Retirement System is only 40 percent funded as the fund prepares to ask taxpayers for more money.
The Illinois Teachers’ Retirement System says it will need 10 percent more from taxpayers in the state’s next budget, which begins next summer, an increase of more than $350 million.
The existing state budget included more than $4.3 billion for TRS. Next year, the ask could be north of $4.8 billion. TRS Executive Director Dick Ingram said that’s just the statutorily required contribution. He said the actuarial contribution level should be nearly $7.8 billion.
TRS has the highest funding levels of the state’s five pension funds at 40 percent. That’s despite a booming stock market. Ingram said investment returns will never be enough to make up for the unfunded liability created by years of underfunding from the state.
“That’s such a deep hole of underfunding that there’s no way that you can invest your way out of it,” Ingram said.
TRS’s total unfunded liability is about $73.4 billion. Include all the state’s pensions funds and the unfunded liability taxpayers are on the hook for is at least $130 billion. Credit rating agency Moody’s has estimated the liability stands at more than $200 billion.
State Rep. Jeanne Ives, R-Wheaton, said the funds are bankrupt.
“And people have this idea in their mind that eventually this stuff can be paid back,” Ives said. “We’re past that curve. There is no way. You cannot tax people enough to pay these pensions. So there will be a day of reckoning.”
While some criticize the pensions for being too costly, Ingram said the benefits aren’t overly generous because teachers don’t get Social Security benefits. He said the problem is the lack of funding discipline from the state.
“We’ve never ever funded [pensions] on an actuarial basis, so over time you can’t be surprised that there is this shortfall,” Ingram said.
Ives said the benefits are unaffordable, having increased more than 1,000 percent in the past 30 years, according to financial analysis from Wirepoints.
“We just simply can’t afford it,” Ives said. “They continue to underfund these pensions because the benefit levels are way too high.”
She said lawmakers should get all new hires out of pensions and into self-managed plans, and voters should change the state constitution to rework promised pension benefits, including changing the 3 percent compounded annual increase pensioners get which increases the total payout substantially over the lifetime of the beneficiary.