By: Mark Glennon*
The first actuarial report is out for an Illinois pension for fiscal year 2022, which ended on June 30. It’s for the TRS, the Teachers Retirement System, which accounts for well over half of Illinois state-level pension debt.
Unfunded liabilities grew about $6 billion from $74.7 billion to $80.7 billion on a fair asset value basis. Its funded ratio worsened from 46.2% to 43.8%. The drop occurred despite a one-time, special contribution by taxpayers to the fund of $173 million that was in addition to their annual, scheduled contributions.
Expect Illinois’ other pensions to suffer similarly dismal results as their 2022 reports are published.
Keep these results in mind as you continue to hear Illinois lawmakers boasting about the state’s supposedly improved fiscal situation and when you hear Comptroller Susana Mendoza brag about reduction in the state’s unpaid ordinary payables. Know that these growing pension liabilities are entirely ignored in “balanced budget” claims and in the list of bills that Mendoza reports.
In short, it’s the same story we’ve reported nearly every year. Illinois sinks further and further into debt despite ever larger pension contributions by taxpayers. As always, the actuarial report says, in bold face, that the annual contributions to the pension are not actuarially sound. It would have taken another $3.5 billion from taxpayers to accomplish that, the actuary says.
The 2022 results were also worsened by poor financial markets that started down in January, resulting in a -1.16% return on pension assets on a market value basis for the fiscal year. Excellent financial markets made 2021 an unusually good year for TRS and most other pensions, so their position actually improved that year. That was unusual, however, and the pension’s trajectory has returned to its norm.
Illinois’ pension crisis hasn’t gone away. It has worsened, as usual. We will provide a more detailed update on all Illinois pensions once the remaining reports are published.
*Mark Glennon is founder of Wirepoints.
A set of state lawmakers want to extend CPS’ current school closing moratorium to February 1, 2027 – the same year CPS is set to transition to a fully-elected school board. That means schools like Manley High School, with capacity for more than 1,000 students but enrollment of just 78, can’t be closed for anther three years. The school spends $45,000 per student, but just 2.4% of students read at grade level.
Hopefully, all media will get the message, in Illinois, too.
Ted joined Tom Miller of WJPF to talk about Illinois’ highest-in-the-nation property taxes, why lawmakers don’t want to touch the tax’s cost drivers, just how much Illinoisans’ tax burden has grown over the decades, why Gov. Pritzker failed to meet his promise to reform property taxes, and more.
PPF is right, taxes should go up another 20% through higher Real Estate, Sales and Income taxes. Make the Poor Honest taxpayer hurt and hurt good. No other way to solve this problem, it is only then they would do away with HUGE PENSIONS.
We will have a further story up tomorrow with the 2022 numbers for the other major state pensions.
Pretty sure TRS funding ratio was in the 40% range over 50 years ago and yet pensions are still being paid. If you want a higher funding ratio then we need to pay more taxes into the fund. Pretty simple.
First, as they say, past performance is no indication of future results. More important is the impact on the state and taxpayers. In a properly funded plan the state would be paying only Normal Cost, which is what is needed to pay for benefits as they accrue. But as the report shows, taxpayers have to contribute five times that amount to cover all the unfunded liabilities for work already performed. That’s what’s strangling the budget and assures that IL can’t regain competitive status on taxes and services. You may choose to remain comfortable that your pension will be paid, questionable… Read more »
“In a properly funded plan the state would be paying only Normal Cost” That would be great Mark. Unfortunately the voters don’t hold our leaders accountable and we have been treating like a negative amortization mortgage. “taxpayers have to contribute five times that amount to cover all the unfunded liabilities for work already performed.” Yes. When you don’t pay your bills they become more expensive. I’m sure you’ve seen my comments that taxes need to be increased so that actuarial contributions are made and we don’t go any deeper. Instead the electorate believes that funding the pensions is a pensioner… Read more »
Soon enough, it won’t be my problem!
Good for you
Or mine enough is enough
Or mine !!! Leaving as soon as I can
The politicians mislead the public so the public does not understand the Illinois Pension Scam.
Blame the victim not the perp, smooth.
PPF – you know as well as I do that the rate of return applied to these funds is significantly higher than what actually obtains. One only need look at the overall investment landscape of 2022 where the S & P 500 is down 16 percent or so this past year to demonstrate why a 3.5 to 4 percent rate of return is far more realistic than anything near the 6.50 -7 percent utilized. Thrown in all the politically driven junky insider and other investments that are also made and it is not difficult to question the reality of the… Read more »
TRS 10 year rate of return is 7.4%. 3 year rate of return 6.5%. Texas Employee pension funds 10 year rate of return 8.5%.
If they are only earning 3.5 to 4% then they should be fired.
PPF, you said someone who doesn’t perform should be fired!! That’s not your party line. On second thought, maybe you are learning something from reading this site.
You’ve made an assumption that because I respect contracts and don’t want to steal from retirees that somehow that makes me a Democrat. Remember it was Republicans that sponsored the pension amendment in the constitution. Republicans thought it was completely unfair to have public employees forced to join a pension plan to only have it yanked out from under them right before they retire.
FYI, I would love to see the ILGOP be more competitive in the state and bring some fiscal balance to Democratic spending. One party rule isn’t good for anyone.
Lol. Ok democrat.
So what’s your point? Politicians won’t pay the pensions in full because the pensions are not affordable.
My point is you can’t complain about pensions not being fully funded or the budget not being “really” balanced if you are not willing to fix it. In order to fix it more money needs to be put in. If politicians won’t then don’t clutch your pearls when you find out that pensions are underfunded.
Remember when you say it’s not affordable that it only gets more expensive and less affordable with each passing year that we short change pensions. Even if the funds run dry, the state will be paying pensions first right out of the general fund.
Don’t argue with idiots, Mark. Whoever this guy is, he’s been programmed.
So you can’t counter any of my points. Got it.
I honestly don’t understand how people can defend 40% funding level. Time has shown it has taken exponentially more money to keep funding levels the same. If you told someone 50 years ago how much we paid this year and that the funding level was still only 40%, they’d faint.
How that is not a huge red flag, I dunno. I think it’s the only way pensionistas can rationalize an irrational and dangerous situation.
I’m not defending 40% funding for pensions. Just pointing out it has absolutely nothing to do with pensioners being paid. If you want higher funding then advocate for more tax revenue going towards the pension funds so that we are making actuarial contributions. I don’t understand people that complain about the low funding percentage and then refuse to increase funding. They keep underfunding it and then wonder why they haven’t made any improvements. Madness.
You and I and every one here knows that its only a matter of time before the various poorer communities consisting of impoverished third worlders default on their pension payment obligations. Many communities in IL struggle to pay the bills already. What is the state going to do, withhold money from dozens of municipalities? They can try, I suppose, but it’s politically unsustainable. It’s a bit like masking mandate a year ago. JB and his slime doubled down and then doubled down again and kept masks on kids longer than every state within a 1,000 miles. Then, suddenly, one day… Read more »
Irrelevant. The idea behind 100% funding is that the people who consumed the services paid the full value for them. That the state successfully paid everyone’s pensions with a 40% or 4% funding balance means nothing. You could technically pay out pensions w/ no pension fund at all. It would consume a giant portion of the budget, but you could. It would also mean the taxpayers furthest from the services rendered were paying. And you’re missing the point about what 40% funding means across time. 40% funding in 1972 doesn’t mean the same thing as 40% funded in 2022. You… Read more »
We both agree that 100% funding is the goal. We also both agree that pensions can still be paid out if the funds are completely dry. Finding common ground.
wrong! TRS and the democrat party have taken “pension holidays” numerous times. Look up 2005 pension holiday. TOTAL abuse of power and the teachers and the tax payers are thrown under the bus!
When did TRS take a pension “holiday”? TRS runs the pension they don’t make payments to the funds. Thanks for letting everyone know that you are completely clueless about pension funding.
Sure politicians took pension holidays. We still are thanks to the Edgar pension ramp. Even when statutory pension payments are made they are shorting pensions based on Jim Edgars plan. You know….a Republican.
Time to get educated Dave and stop with the talking points.
Mark, who’s gonna tell TRS the actuarial assumptions they use for investment return rate and discount rate mean that the target funding percentage is and always has been 100%.
Sometimes I feel like I understand pension accounting more than the pension administrators.
I take that to mean that the funds shouldn’t shoot for 90% funding by 2045 as is the current goal and instead should strive for 100% funding.
Based on the assumptions they use, yes.
Legislative targets like 90% and anecdotal targets of 70% or 80% have nothing to do with what the plan is projecting mathematically. TRS requires 100% funding to be fully solvent.
Nixit, not sure I understand. The statutory formula only targets 90% funding.
Mark, think of how pension accounting works. A 90% funding target is only valid if the assumptions used for the investment return rate and discount rate mathematically work out to 90%. The only way to mathematically use a target percentage below 100% (think 80%) is if the discount rate is less than the expected rate of return. Under the current assumptions under all the state and local pension plans, those rates are equal. Therefore, the target funding percentage should be 100%. Find a few private sector pension plans that have a target 80% funding level and see what rates they assume… Read more »
BuT bUt EvErYoNe Is GoInG tO lEaVe ThE sTaTe!?!.!
Yes, millions of blacks/whites have left the state during previous decades, and hispanic immigrants have moved into their homes and schools. So yes, they are leaving.
eVeRyOnE!?!
Close: LeaViNG iN dROvEs!!!
bUt BUt aVerAGe raTe oF ReTuRn?!?!
Reported by Zerohedge 6/14/2020. The TRS has been engaging in risky OTC derivative trades. FTA and I will have the link below: “If you were to have faxed me this balance sheet and asked me to guess who it belonged to, I would have guessed, Citadel, Magnetar or even a proprietary trading desk at a bank.” So begins a story by Alexandra Harris of the Medill Journalism school at Northwestern, which, however, does not focus on some exotic product-specialized hedge fund, or some discount window (taxpayer capital) backed prop desk (hedge fund) at a TBTF bank, but instead at the 61% underfunded,… Read more »
Mark, there’s probably a news story about TRS you missed because no local news media reported it: https://www.axios.com/local/twin-cities/2022/12/01/minneapolis-office-towers-auction-lasalle-fifth-street Owners of some of the most expensive office towers in the Twin Cities are choosing to walk away from their properties instead of continuing to make loan payments. What’s happening: The 30-story LaSalle Plaza in downtown Minneapolis is scheduled to go to auction next week after the previous owner, the Teachers’ Retirement System of the State of Illinois, avoided foreclosure by transferring the building to its lender, Northwest Mutual. Nearby Fifth Street Towers is facing the same fate and may also go… Read more »
Immigrants! The immigrants are going to pay for it all. Why they will get manufacturing jobs and buy houses and pay taxes to fund these pensioner’s homes in Florida.
The job of a teacher is to collect wages, benefits and huge pensions at a young age. Education does not seem to matter looking at the results (very poor). Many flee Illinois as soon as the pension kicks in (age 45 to 55), never to return. The teachers have figured out a way to steal funds from unborn children, something no one in history has been able to do. What is destroying the quality of life is the huge tax burden that this puts on private sector workers. Do not be surprised if the young college kids never come back… Read more »
Living rent free inside your head. It’s not pensioners that cause the debt. It’s the voters that elected the officials that continually short change pension contributions. Illinois pension debt will continue to get worse until the legislature and the Gov start making actuarial payments instead of made up statutory contributions. So everyone complains about the pension debt but nobody demands increased contributions. Is everyone prepared for the income tax rate to increase to 6.5%? That’s what it would take to start making proper payments to make up for all the years of short falls from the state. If taxpayers don’t… Read more »
PPF, I thought surely you’d be the first commenter here. You are fourth. You’re slipping.
Mark,
Go back and check your work. I was third and you were fourth. lol
You’re the one writing these articles Mark. You are consistently pointing out that the budget isn’t truly balanced which is a great service to the voters of Illinois. Now you just need to start including in ALL of your columns that this will continue until actuarial contributions are made even if the funds have strong returns.
Blame yesterday and repent for the time that remains. Beat feet when you can or must. Best to be elsewhere when the collapse begins.
Raise taxes enough and only government workers will be left in Illinois, all the private sectors will have left the state. You will soon be eating your own kind. Best of luck to you. You deserve the train wreck you have created.
You don’t really seem to understand how “freedom of movement” works, do you? If the state legislature massively increases taxes to pay for these benefits, you think everyone is just going to stay here and put up with it? Once people leave, they will have to raise taxes again, leading to more people leaving, leading to more taxes, leading to….a death spiral. See “puerto rico”.
I’d start thinking now about what salon you want to get your haircut at.
I completely understand. I understand that the state of Illinois raised their taxes from 3% to 4.95% and they are collecting more revenue than ever and the population has been stagnant for the last 10 years. During this time real estate has remained relatively stagnant while prices in other places have skyrocketed by comparison. So you see, there isn’t going to be a mass exodus as the other areas become more and more expensive. Also, when reviewing Puerto Rico at your suggestion, I noticed that all existing pensioners had their benefits remain intact. Of course PR is not a state… Read more »
“So you see, there isn’t going to be a mass exodus as the other areas become more and more expensive.” There is a mass exodus. It’s happened. It continues to happen. The Chicago region has only grown by 5.6% in the past 20 years. The white/black population has plummeted. The population losses are offset by hispanic immigrants who’ve increased to nearly 25% of the regions population. Yes, everyone we know is leaving. And the new residents replacing the leaving residents are members of an insulated ethic community. Few of whom have enough income, regardless of the tax rate, to pay… Read more »
Link for facts above
https://uofi.app.box.com/s/vh3xoa0h2jojix0mmpw798ua6pb92kwi
The population has remained flat during the last 10 years. People come and people go and tax revenue continues to grow. I know it doesn’t fit your doom and gloom model but it’s the truth.
Tax revenue is growing primarily because of 1. inflation and 2. the increase in migrants taking high paying managerial/professional positions. Compare Texas to IL
https://www.foxbusiness.com/economy/texas-tax-revenue-jumps-record-inflation-rages
Texas tax revenue jumps by record 26% as inflation rages
I’d try to convince you otherwise, but I see you’re one of these guys what wouldn’t accept the truth even if it was shoved in your face. In other words, an AFSCME member. LOL, enjoy your mess chumbolone.
Two comments to me and not one counter point. I don’t think you have the intellect to do anything other than repeat a talking point.
Was I wrong about PR? Detroit?
You’re not really educated on this topic summer gal.
Detroit is facing a second bankruptcy because the first haircut was not enough. The court provided a long contribution moratorium that hasn’t dealt with the deficit. The small haircut was based on bogus mortality tables. They needed union votes to end the bankruptcy so they lowballed the numbers to save the art museum holdings. Look up Detroit pension cliff. Even now the press repeats the politicians’ half truths, aided by the actuaries and lawyers and judges who want to collect their fees before the ignorant voters catch on. Not that there’s enough money to fix the problems so everyone votes… Read more »
Check out the Curley effect as political strategy.
Raising taxes would be a diminishment and impairment of my retirement.
Nothing forces you to remain in Illinois so it’s not diminishing your retirement. If you choose to live and work in Illinois then you will need to pay for the services the government provides. That’s not a diminishment but just you paying for the services that the voters as a whole decided upon.
Irrelevant. If it takes money that would have been put in my retirement fund, which it is, it is very much diminishing my retirement.
All expenses do that. You are required to pay your bills. That’s how this works.
Not at the expense of diminishing my retirement.
Check again. That’s exactly how it works.
Your comed bill increases. Diminishing your retirement
Food costs increase. Diminishing of retirement
Taxes increase. Diminishing of retirement
All day and every day. You of course are free to leave.
Spot on for Michigan too. All my relatives there in public education retired on 3K+ per month and paid health care by age 54!
And that was a decade ago