The Illinois Senate and House passed a bill that would cut state pension fund contributions by $2.3 billion for the next two fiscal years, or by about half the level of funding required under current law, according to Tim Blair, pension manager, state commission on government forecasting and accountability. The money would be diverted for other state spending to produce a balanced budget.
The legislation passed both houses by wide margins Sunday. Gov. Rod Blagojevich has not yet signed the bill.
Contributions to the $33.1 billion Illinois State Teachers' Retirement System, Springfield - the largest of the five state retirement systems - would be cut by $524 million for 2006 and about $500 million for 2007, said John Day, assistant to the executive director. Contributions would be more than $1.1 billion each year without the cuts.
The contribution to the $13 billion Illinois State Universities Retirement System, Champaign, would be cut to $166 million from $364 million for 2006, said James Hacking, executive director. In 2007, the contribution would be cut to $252 million from $431 million.
"It will impact our ability to manage cash flow for the coming year and impacts us in the long term," said Mr. Day. "And it impacts the state in the long term. The money not paid now will have to be paid eventually with an interest cost we haven't calculated."
"There is very little savings to the state from pension restructuring and reform," which reduced benefits for new employees, Mr. Hacking said. "Instead, they chose to raid the pension piggybank.
"This is a catastrophe in the making," Mr. Hacking said. "These costs are driven not because of future benefit costs, but because the state failed to pay for benefits as they have been approved in the past."
The bill would also raise employee contributions to the state retirement systems to 9.4% from 9%, said Mr. Blair.
The five state retirement systems have total assets of about $55 billion and are underfunded by $35 billion, according to the state Office of Management and Budget, Springfield. The other systems affected are the $9.99 billion Illinois State Employees' Retirement System; the $534 billion Illinois Judges Retirement System; and the $83 million Illinois General Assembly Retirement System, all in Springfield.