* A tiny bit of good news…
According to a new report out today by Moody’s Investors Service, the “adjusted net pension liability” in the state’s five retirement systems dropped 9 percent, or $16.5 billion, to “only” $173 billion, in the year ended June 30. Adjusted net pension liability is a form of unfunded liability. Moody’s defines this differently than other ratings agencies, reflecting what it views as overly optimistic assumptions by pension fund managers.
The New York bond rater attributed the 9 percent decline to two factors: The pension funds earned 12.9 percent on their investments, exceeding their assumed 7.9 percent annual return, and interest rates rose, narrowing the spread between what the state expects to earn on pension investments in the future and what Moody’s believes will be earned.
* But, of course, this being Illinois there’s always bad news…
On a three-year average basis, Illinois’ adjusted net pension liability actually rose 7.2 percent, to $165.8 billion, Moody’s said. And Illinois still has a ratio of pension liabilities to revenues of 241 percent, compared with a 50-state median of 45 percent.
As a result, without reform the share of the state’s general (operating) funds that will have to go to pay pension costs will rise from 22 percent in fiscal 2013 to 24 percent in 2014 and potentially 26 percent in 2015, it said.
That 26 percent figure is based on the partial expiration of the tax hike midway through FY 2015.