The Illinois Teachers System (TRS), the state’s largest pension fund, released the editorial linked here on November 16. It says “TRS at the end of FY 2012 had only 40.6 percent of what will be needed to pay all anticipated benefits over the next 30 years.”
But new rules already issued by the Government Accounting Standards Board will soon force them to make more realistic assumptions about how much money they make on their investments which will shatter even that horribly low 40.6% number. The Center for Retirement Research at Boston College, among others, has estimated the impact and they find that TRS, under the new rules, could claim that it has only 18% of what it needs to meet its obligations. That’s right, they have only 18% of what they need, and the numbers have worsened since 2010, the year on which the estimate was based! The recently released bipartisan task force report on state finance co-headed by Paul Volker also said the TRS deficit is about 18% under the new accounting rules.
The ratings agencies, too, are moving to force pension funds to make more realistic assumptions about their returns. Moody’s is requiring changes that, by themselves, would increase the officially reported unfunded liabilities of all Illinois’ pensions by about 50%.
What gives? TRS does not deny that it has serious challenges and needs much more money from the state: It says just that in its release. Why not tell us if their problems are twice as bad as their official numbers?
The ‘why’ is a bit of a mystery on this one, but it’s clear that Illinois is working off of phony numbers, and this is another example. The fiscal crisis won’t be fixed unless we use honest numbers. The Civic Committee in Chicago was ridiculed last week for saying that the state’s pension problem is “unfixable.” The reality is that experts from outside the state have already said the numbers are at least as bad as the Civic Committee’s numbers, and the state will soon be forced to fess up with honest reporting that will say roughly the same thing.