Prairie State Wire

Late last month, the Teachers’ Retirement System (TRS) announced it needed an additional $400 million from Springfield next fiscal year, which begins July 2019. 

"TRS investments had a good year, but we cannot invest our way out of this problem," Dick Ingram, executive director of TRS, said in the Oct. 31 statement.

The troubling news for taxpayers is that $400 million won’t even begin to make problem Ingram refers to go away. The retirement system needs close to $3 billion next year from the state’s coffers just to keep from going further into the hole, fiscal watchdog Mark Glennon told Prairie State Wire. And, he said, the pension buy-out program in this year’s budget won’t help TRS or the other four-state system likewise operating in the red, as lawmakers had claimed.

“With the buyout, they assumed a $300 million to $400 million savings in this year’s budget, but the bonds for the buyouts haven’t even been floated yet,” Glennon, who founded Wirepoints, said. “The fiscal effect of this won’t kick into next year, and the savings then are unknown.”

The very origins of the public-pension-funding crisis itself go back to same sort of legislative pretense and avoidance, Glennon said.

“Every year they [lawmakers] pick a number out of thin air for funding the pension systems,” he said. “They claim it’s based on actuarial science. It isn’t. It’s a fiction.”

The other four-state systems are the State Universities Retirement System, the State Employees Retirement System, the General Assembly Retirement System and the Judges Retirement System. Moody’s puts the unfunded liability for five systems combined at approximately $200 billion.

The pensions systems in some Illinois municipalities are in even worse shape. A Wirepoints analysis published in April showed that 400 municipalities are on the verge of having their tax revenues garnished by the state to make up for what the cities are failing to contribute to their pension funds. That process started in Harvey in February; the state comptroller garnished the city’s revenues and the city quickly announced that 40 public safety officials would be laid off.

In July, the comptroller stopped withholding revenues after reaching a repayment deal with Harvey City Council.

Glennon says that the answers, while not pretty, are out there.  

One, filed in the House in May by State Rep. Jeanne Ives (R-Wheaton), would allow local governments to declare bankruptcy. Bankruptcy would help the locals address labor costs as well as employee retirement costs.

Another would be the enactment of  a constitutional amendment to delete the pension protection clause and allow changes in benefit structures. Arizona voters just approved such an amendment, and their pension liability problem is nothing on the order of the problem in Illinois.

“It’s inexcusable that Illinois hasn’t acted to amend its pension clause, which our courts have interpreted as a suicide pact,” Glennon said. “An amendment might be challenged under the Contracts Clause in the United States Constitution, but we think that challenge would probably fail.”