* Not to diminish the problem with Illinois’ pension debt, but this is an apples to oranges comparison from the Illinois Policy Institute’s news service…
In one year, Illinois’ pensions added more debt than 25 U.S. states’ entire budgets.
The Illinois Department of Insurance released its two-year report on every public pension in the state. From 2015 to 2016, Illinois’ 671 pension funds added $17 billion in additional unfunded liabilities, bringing it up to $185 billion. That’s larger than 25 state budgets in fiscal year 2016.
The pension debt is long-term. Those are one-year budgets.
The Teachers’ Retirement Fund is the state’s largest pension. At an estimated $71.4 billion in unfunded liabilities, it also carries the most debt. Director Dick Ingram said that his fund’s main issue is that the older, more generous pensions cost too much.
“The albatross that’s still out there is the Tier 1 unfunded,” he said.
Yep. And that debt can pretty much only be reduced by making the payments. Actually, it’s the only way unless somebody comes up with a brilliant plan that hasn’t yet been devised or tried.
* Moody’s recently issued a rating for the state’s upcoming bond issue to pay off part of the bill backlog. Check out the number one way Moody’s says Illinois can improve its credit rating…
Factors that Could Lead to an Upgrade
- Adoption of a realistic, long-term plan to provide funding for pension obligations
- Progress in reducing the state’s massive payment backlog, and formulation of a legal or policy framework to prevent renewed build-up of late bills
- Enactment of recurring fiscal measures that support the expectation of sustainable, structural balance
And check out the number two factor that could lead to a downgrade into junk bond status…
Factors that Could Lead to a Downgrade
- Structural imbalance that leads to renewed build-up of unpaid bills following issuance of debt to pay down backlog
- Efforts to obtain near-term fiscal relief by reducing pension contributions in a way that exacerbates the state’s long-term funding burden or indicates a lack of long-term sustainability
- Difficulty managing the impacts of adverse exogenous factors, such as a national recession or a reduction in federal Medicaid funding
*** UPDATE *** Dave Urbanek at TRS…
The Illinois News Network story you highlighted today misquoted Dick. We saw it late in the morning and asked them for a correction. They complied and changed the story in the afternoon. You ran the original version.
The problem was that in the lead up to Dick’s quote in the original version, they wrote that he said that older pension benefits “cost too much.” That’s not what he said in the interview with them. The “albatross” he was referring to in his quote is the unfunded liability.
No one at TRS would ever give an opinion on the nature of benefits, and especially the cost of those benefits. Benefits are enacted exclusively by legislators and the governor. The job of TRS is strictly to administer those benefits, whatever they may be. We have to stay detached from the creation of benefits. We will talk about whether we have the proper resources and tools to do the job and keep the fund financially healthy, but commenting on the nature or cost of the benefits would violate the System’s fiduciary duty to its members.
Just wanted to keep the record straight.