Illinois’ five state retirement systems could see state funding cut by a total of $2.85 billion over the next several months under a proposal today from Gov. Pat Quinn.
The five systems are the $29.1 billion Illinois Teachers’ Retirement System, Springfield; the $9.6 billion Illinois State Universities Retirement System, Champaign; and the Illinois State Board of Investment, Chicago, which oversees a combined $8.2 billion in assets of the State Employees’ Retirement System, Judges’ Retirement System, and General Assembly Retirement System.
The plans are underfunded by a combined 54.3%.
Under Mr. Quinn’s proposal, included in his fiscal 2010 budget, $550 million in payments due through June 30 and another $2.3 billion in the next fiscal year would be eliminated.
His proposal calls for making total contributions of $2.061 billion for the new fiscal year — $1.517 billion for benefits earned by employees during the year and the rest in pension obligation bond debt service.
Mr. Quinn proposed issuing new pension obligations bonds if market conditions are favorable, although he didn’t give an amount. The state issued $10 billion in pension obligation bonds in 2003.
Also, he proposed cutting pension benefits for new state employees to try to eliminate a combined $73 billion in unfunded pension obligations of the five systems.
“This plan will reduce the taxpayers’ pension liabilities by $162 billion over the next 36 years,” Mr. Quinn told the state’s General Assembly.
Under his plan, new hires would pay one percentage point less than the currently required employee pension contribution rate. Existing state employees will keep their current benefits but would have their pension contribution rate raised by two percentage points.
That raise in current employees’ contributions “is considered an impairment of benefits and prohibited under the Illinois and U.S. constitutions,” according to a statement from the Illinois Teachers system. TRS members currently contribute 9.4% of their pay, the statement said.
The pension contribution cuts “will create even more red ink for generations to come” and “exacerbate the state’s $73 billion pension debt,” of which $41 billion is the teachers plan’s share, the statement said.
The cuts include a $1.3 billion reduction in contributions to the teachers’ system, which “will cost the state $5.8 billion” to make up over 35 years, Jon Bauman, the system’s executive director, said in the statement.
