Illinois hopes to issue pension obligation bonds to raise the $3.7 billion required contributions to the five state retirement systems for the fiscal year that began Thursday, Gov. Pat Quinn said in a teleconference.
The pension borrowing plan, which was approved by the Illinois House, is pending in the state Senate, he said.
The bond issue “will accelerate revenue into the state to pay the pensions,” Mr. Quinn said.
Last January, Illinois sold $3.466 billion in pension obligation bonds, priced at an interest rate of 3.854%, to finance its contributions to the five systems for fiscal year 2010. Illinois still has outstanding almost all of the $10 billion in taxable pension obligation bonds it issued in 2003.
Kelly Kraft, spokeswoman for the Illinois Office of Management and Budget, said the state has no proposed date for selling the pension bonds, which could be priced at an interest rate of 4% to 4.5%.
“The least costly option for taxpayers is to use responsible borrowing to address our pension obligation,” Ms. Kraft said. ”We are working with legislators to get the borrowing passed.”
Even though the bond issue is still pending, Mr. Quinn said, “We are going to pay the pension (contributions)” for the 2011 fiscal year, which ends June 30, 2011. “The first payment (contribution) is (due) July 15, then Aug. 15 … pretty much the middle of (every) month.”
“Our intention is to pay each time the obligation comes forward, to pay whatever we owe in the pension,” Mr. Quinn said. “It’s not $4 billion on July 15; it’s a portion of that. We are going to pay it; it’s part or our budget.”
The combined unfunded liabilities of the systems total $70 billion to $80 billion, David Vaught, director of the state OMB, said at the teleconference.
The five systems are the $32.1 billion Illinois Teachers’ Retirement System, Springfield; the $12.4 billion Illinois State Universities Retirement System, Champaign; and the $9.9 billion Illinois State Board of Investment, Chicago, which oversees the investments of the Illinois State Employees’ Retirement System, the Illinois Judges’ Retirement System and the Illinois General Assembly RetiremIllinois State Board of Investment.9 billion Illinois State Board of Investment, Chicago, which oversees the investments of the Illinois State Employees’ Retirement System, the Illinois Judges’ Retirement System and the Illinois General Assembly Retirement System.