Pension Board hits state with $420 million charge

Pension Board hits state with $420 million charge

James Thorpe

On August 26th the board of the Teacher’s Retirement System voted to lower the assumed rate of return from 7.5% to 7% which adds an additional $420 million that the state will have to contribute to the pension system. Illinois is not the only state that is having trouble with lack of return in its pension system as many other states are reporting disappointing returns and economists are saying to adjust expectations. Some have looked at this move by the TRS as a panic move the spokesperson for said "While some seem to think otherwise, nothing we are considering today is precipitate or rushed. We are following well-established procedures that are consistent with good actuarial practice and conform with the recommendations of the state actuary," TRS Executive Director Dick Ingram told the board before they voted on August 26th. This decision by the TRS has been met with criticism by Governor Rauner as he warns higher taxes and cuts in educational and social spending could be the price the state has to pay for footing this $420 million bill. Illinois currently has the worst pension system in the USA when it comes to funding with almost $111 billion in unfunded liabilities. Governor Rauner’s office released a statement “With less than two hours' notice, Illinois taxpayers including our social service providers and small business owners were just handed a bill for nearly a half-billion dollars. While questions remain about the legality of today's action, it further underscores the need for real pension reform in Illinois. The continual need to ask more and more from taxpayers proves yet again the current pension system is fatally flawed and must be changed. " As the battle between the Governor’s office and many state-funded programs and state lawmakers heats up it will be interesting to see how the Governor’s office responds to demands from lawmakers and government agencies and vice versa.