By: Mark Glennon*
The statement is from TRS, The Teachers’ Retirement System of Illinois. It’s officially just 40% funded and its reported $76 billion unfunded liability accounts for about 60% of Illinois’ state-level pension shortfall.
Most significantly, the statement opposes the “can-kick” in Pritzker’s budget proposal that would extend by seven years the target date set by current law to reach 90 percent funding. It further opposes any other effort to reduce the taxpayer contributions for the upcoming fiscal year below the $4.8 billion TRS earlier calculated is required by existing statute.
The statement further opposed any expansion of the current “buyout” program unless funds used for the buyout come from some source outside the pension. Wirepoints and others have questioned the economics of the buyout program which have never been properly documented by the state. We expect the buyout program will result in minimal savings to the pensions and was used as a pretext for reducing earlier state contributions to its pensions and covering up budget deficits.
The statement also reaffirmed that even the currently scheduled contribution to TRS is $3 billion short of “full funding.”
The rebuke of a Democratic governor by a unanimous Illinois pension board is interesting and unusual because they are typically dominated by Democrats. TRS is governed by 13 trustees including the state superintendent of education (who Pritzker appointed), six trustees appointed by the governor, four trustees elected by contributing TRS members, and two trustees elected by TRS annuitants. Two appointed seats are currently vacant. Four were appointed by Republican Governor Bruce Rauner. Pritzker has yet to make any appointments aside from the state superintendent.
Personally, if I were a trustee of an Illinois pension, I’d be cutting current payouts to ensure that something is left for younger retirees who will be facing crisis. There’s nothing in the system for them, especially Tier 2 current workers, for whom not a dime is set aside. Textbook duties of a fiduciary include treating all claimants equally. Instead of honoring that duty, pensions are bleeding out full payments, leaving later claimants with ever-diminishing hopes in a system where benefit cuts are inevitable.
That’s not to say I’d expect an Illinois court to agree with me, which I wrote about earlier. I have zero respect for how Illinois courts have dealt with our pension crisis.
*Mark Glennon is founder of Wirepoints.