Illinois’ largest pension system is asking for 10.6% more in state contributions for next year’s fiscal budget as a way to combat poor payments and reduced rates.
The $51.7 billion Teachers’ Retirement System wants about $400 million to be added to the budget, which would see total contributions rise to more than $4.8 billion.
The pension fund’s executive director, Dick Ingram, said the organization “had a good year.” And it did, returning 8.45%. But, he added, it simply cannot “invest our way out of this problem.”
That problem is the Teachers’ Retirement System’s 40.7% funding ratio. “The unfunded liability is too large and grows every year,” Ingram said.
The plan has more than $75 billion in liabilities, the highest of the $130 billion total among the state’s five systems. The other four are the State Universities Retirement System, the State Employees Retirement System, the General Assembly Retirement System, and the Judges Retirement System.
According to Ingram, the principal and interest on the debt accounts for 76% of the state’s annual contribution to the fund. Absent the debt service, the state would only need to pay $1.2 billion the following budget year.
Illinois’ next budget year begins on July 1, 2019.
The state contribution was lowered three times in fiscal 2018. This expanded the liabilities by 3.04%, and increased the fund’s long-term liabilities by 3.9%, to $127.7 billion.
“Those unprecedented cuts totaled some $470 million and eroded progress toward financial stability,” Ingram said. “The future viability of TRS is directly dependent on continued state support that adequately meets the cost of benefits and pays off the unfunded liability.”
The state has never paid its full contribution to the teacher’s fund since its 1939 inception.