Going backward on pension debt
As Joe Cahill perceptively noted in his July 11 column (“New budget threatens to deepen pension debt”) state officials recently took a step backward in their oft-stated desire to resolve the financial problems facing the Teachers’ Retirement System and Illinois’ other public pension funds.
As part of the new state budget for fiscal year 2018, officials enacted a law that requires public pension systems to phase in, over a five-year period, the monetary effects that arise from any changes in their actuarial assumptions.
This change will ease the immediate burden on the state’s cash-strapped checkbook. However, the cost of pensions earned by teachers still must be met. Paying less to TRS now means paying more to TRS later.
This strategy of pushing pension obligations into the infinite future has been a mainstay in state government for almost 80 years. Delaying pension payments each year since 1939 has created a $71 billion unfunded liability at TRS—one of the largest debts of its kind in the country.
Here’s the reality: The state’s current contribution to TRS for FY 2018 is $4.65 billion. That amount likely will be reduced in the coming months. But the “full funding” amount the state should be paying is $6.88 billion. That won’t change. And of the $4.65 billion TRS expects to receive, the majority of that allocation, $3.7 billion, is a payment on the unfunded liability. The actual cost of teacher pensions is $923 million.
Reducing the state’s annual contribution further is not good public policy.
DICK INGRAMExecutive directorTeachers’ Retirement System of the State of Illinois
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