States wrestle with pension issues as new fiscal year starts
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July 01, 2015 01:00 AM

States wrestle with pension issues as new fiscal year starts

Meaghan Kilroy
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    Wednesday marks the first day of the new fiscal year for most states, including Illinois and Pennsylvania, where in spite of the date, 2016 fiscal year budgets have yet to be passed.

    At the same time, lawmakers in those states are grappling with pension issues as further threats to their states' finances.

    In Pennsylvania, it remains to be seen whether Gov. Tom Wolf will sign off on a bill to enroll certain new state and public school employees in a defined contribution plan rather than the current pension plans. Lawmakers would also be enrolled into the new DC plan upon re-election.

    The measure, which is expected to save billions of dollars over the long term, passed the Legislature Tuesday.

    A spokesman for Mr. Wolf could not immediately be reached for comment.

    Meanwhile, an Illinois government shutdown looms as legislators and Gov. Bruce Rauner struggle to reach a budget agreement. Burdened by its unfunded pension liabilities, the state also continues to search for pension reform.

    Dave Urbanek, a spokesman for the $50 billion Illinois Teachers' Retirement System, Springfield, said a government shutdown could “indirectly” affect the pension fund.

    In a shutdown, TRS has legal authority to pay benefits, which are funded through a trust fund and do not require annual appropriations by the General Assembly or official authority from the General Assembly to spend those funds. That said, TRS could be “hampered” if the agencies it relies on for some of its operations, such as writing pension checks, are shut down, Mr. Urbanek said.

    Even at the local level, finances in Illinois are strained. Chicago Public Schools faced a Tuesday deadline for a $634 million payment to the $10.2 billion Chicago Public School Teachers' Pension & Retirement Fund. Jesse Ruiz, Chicago Public School's interim CEO, said the cash-strapped school district borrowed funds to make its required pension contribution Tuesday.

    “Springfield has failed to address Chicago Public Schools' financial crisis, so (Tuesday) CPS made its 2015 pension payment by borrowing money,” Mr. Ruiz said in an e-mailed statement. “As an immediate consequence of driving the district further into debt and our need to address the existing structural deficit — which is also driven by decades of pension neglect — CPS will make $200 million in cuts. As we have said, CPS could not make the payment and keep cuts away from the classroom, so while school will start on time, our classrooms will be impacted.”

    Separately, in New Jersey last week, Gov. Chris Christie used a line-item veto to reduce the amount of money approved by the Legislature for a state payment to the $79.2 billion New Jersey Pension Fund, Trenton, for the fiscal year starting July 1. Mr. Christie cut that payment to $1.3 billion — the same number as when he unveiled his budget proposal in February but well below the $3.1 billion approved June 25 by the Legislature.

    A few days later, the Legislature passed a measure to advance the deadline for the state's pension payments to July from the current June 30, 2016, deadline to take advantage of a full year's worth of investment returns. The earlier payment could be made using the state's line of credit and could generate an additional $87 million in investment income.

    A spokesman for Mr. Christie could not be reached for comment on the measure Wednesday.

    Robert Steyer contributed to this story.

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