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* Bloomberg…
The State Employees’ Retirement System on Wednesday asked the Illinois State Board of Investment for $100 million on Nov. 10, and another $125 million on Dec. 10 to pay for retiree benefits in the next two months, according to Tim Blair, the system’s executive secretary. The request for cash from the investment board is the largest in the system’s history.
The call comes one week after Comptroller Leslie Geissler Munger said Illinois’s $560 million November payment to its retirement funds would be delayed, and its December payment could also be postponed as the budget stalemate approaches a fifth month. The move was the latest in a series of measures such as failing to appropriate funds to some social-service providers and agencies like the secretary of state’s office that have worsened a financial crisis that is triggering credit downgrades to the state and local entities. Moody’s Investors Service cut Illinois’s general-obligation rating on Thursday.
“I’m disappointed by a lack of willingness to pass a budget,” said Gary Pollack, who manages $12 billion, including some Illinois debt, as head of fixed-income trading at Deutsche Bank AG’s Private Wealth Management unit in New York. For the pensions, “given the level of underfunding, it would probably be more prudent to get more money into that fund sooner rather than later,” he said. […]
While the fund has requested transfers in the past, it has never had withdrawals of more than $100 million, said Blair, who is based in Springfield, the state capital.
posted by Rich Miller
Friday, Oct 23, 15 @ 10:53 am
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The newest death spiral begins.
Comment by Dance Band on the Titanic Friday, Oct 23, 15 @ 10:58 am
==given the level of underfunding, it would probably be more prudent to get more money into that fund sooner rather than later==
That’s crazy talk! You dig a hole, you need to dig deeper! /s
Comment by AC Friday, Oct 23, 15 @ 11:03 am
Taking money out of the pension fund now means even more money must be added to replace it in the future. This isn’t helping.
Comment by Pelonski Friday, Oct 23, 15 @ 11:04 am
This also means less in the investment pool so the pension investments will not earn as much due to a lower balance. This ultimately speeds up the pension system moving into insolvency. We are seeing in practice what Naomi Klein discusses in Shock Doctrine “leaders exploit crises to push through controversial exploitative policies while citizens are too emotionally and physically distracted by disasters or upheavals to mount an effective resistance”
Comment by illlinifan Friday, Oct 23, 15 @ 11:04 am
One more for the list.
I’m hoping we find a pressure point that matters to Rauner before this goes too far.
Comment by Norseman Friday, Oct 23, 15 @ 11:05 am
that’s not good news at all
Comment by cb Friday, Oct 23, 15 @ 11:06 am
Im no expert on this so someone correct me. But article seems to conflate two separate issues (separate only in the short term).
How much the state puts in each year to be invested and the demands for payments from the entire portfolio.
Setting aside the imprudence and cost to delaying payments, the withdrawals are probably still small enough to be covered by existing assets, right?
Or in other words, the delay in payment may not directly affect the withdrawals (although it will have a long term affect as that money was not invested sooner) assuming the current balance sheet can handle which Im betting it can.
Comment by Abe the Babe Friday, Oct 23, 15 @ 11:06 am
But I thought lack of a budget was only short-term pain? /s
Comment by Anonymous Friday, Oct 23, 15 @ 11:08 am
Cubs in ‘16, much. Thank you.
Comment by Norseman Friday, Oct 23, 15 @ 11:15 am
These are two different issues. The outflows are for current benefits, while the Comptroller payment is for future benefits that the state owes.
That the benefit payment is the largest in history is likely because droves of employees are leaving state service at the earliest opportunity, rather than wait out future tinkering of the system or some really bad contract.
Think about it. The word is that employees may get huge increases in the health care premium, but retirees with 25 years of service get free health care. So why stick around and get blasted by the boss every few weeks? I suspect if there is a reasonable AFSCME contract soon, the retirements will level off.
Comment by A Jack Friday, Oct 23, 15 @ 11:37 am
Abe,
There is plenty of money to fund these withdrawals. The problem is that money is supposed to be going the other way, so instead of reducing our unfunded liability, we are increasing it. The effect will be a loss in income and capital gains from the time of the withdrawal until the time of the delayed payment.
Comment by Pelonski Friday, Oct 23, 15 @ 11:39 am
=== Think about it. The word is that employees may get huge increases in the health care premium, but retirees with 25 years of service get free health care. So why stick around and get blasted by the boss every few weeks? I suspect if there is a reasonable AFSCME contract soon, the retirements will level off. ===
A Jack, that’s not entirely accurate. Retirees with 20 of service get premium free health insurance. They still have co-pays, deductible etc.
Comment by Norseman Friday, Oct 23, 15 @ 11:46 am
P.S. A Jack, Rauner wants to increase the co-pays, etc. and lower coverage. These are issues faced by many retirees. Although the “word” is that this will mostly affect non-medicare retirees in addition to current employees.
Comment by Norseman Friday, Oct 23, 15 @ 11:51 am
Yes, Norseman you are correct, 20 years for premium free medical. I have 25 years service / 55 years old on the brain as I inch closer to that early retirement date.
I don’t particularly want to retire early, but given more years of a dysfunctional governor and the possibility of much better higher paying private work, it will be hard to stay with the state.
Comment by A Jack Friday, Oct 23, 15 @ 12:35 pm
I’d be worried if Rauner didn’t have tiger blood and Adonis DNA. Winning takes time.
Comment by ihpsdm Friday, Oct 23, 15 @ 1:09 pm
Out of state media and out of state money managers = Clueless.
Where do they think the missing money is going to come from? Visa? MasterCard?
They missed that another State pension fund sold $375 million of assets to raise cash to cover the shortfall, but maybe I expect too much.
Comment by Arthur Andersen Friday, Oct 23, 15 @ 1:56 pm
This is the story of all 5 of the pension funds. Besides the obvious shorting of payment into the fund, the investment income lost just heaps on the deficit. Meanwhile, every employee dutifully pays into their retirement fund that the state then blows off. Amazing that contributors aren’t more outraged!
With respect to the SEIU premium free benefit–most on this blog understand that SERS is different than SURS, TRS GARS and JRS with different negotiated benefits, compensation. So many people I know think that what one gets, everyone gets. Um, no. But they like to cherry pick the best of each and apply to all.
Comment by AnonymousOne Friday, Oct 23, 15 @ 3:39 pm