Today’s number: $4.5 billion
Tuesday, Jan 14, 2020 - Posted by Rich Miller
* Greg Bishop at The Center Square…
The total liability of the Teachers’ Retirement System of the State of Illinois increased $4.5 billion over the year that ended June 30, 2019, while its funding ratio decreased over the same period, according to the most recent audit of the state’s largest public employee retirement fund.
TRS covers all public retired teachers in Illinois, outside of Chicago Public Schools. An Auditor General financial audit published Tuesday for the previous fiscal year showed the system had a total pension liability of $134.4 billion, an increase of $4.5 billion from the previous year when the fund had a total liability of $129.9.
The funding ratio for TRS decreased from 40 percent in 2018, or $77.9 billion underfunded, to 39.6 percent in 2019, or $81.1 billion underfunded.
Total administrative expenses in 2019 were $24.3 million, up more than $2.7 million from the year before. Investments were up nearly $755,000.
There were nearly 124,300 TRS benefit recipients, an increase of more than 1,870. There were 163,000 active members, an increase of more than 2,100. Inactive membership also increased by more than 2,000 to 136,178.
The audit is here.
- Grimlock - Tuesday, Jan 14, 20 @ 3:58 pm:
The new minimum teacher salary law will have an impact over time, contributions from active teachers will increase as their salaries go up.
- Chambanalyst - Tuesday, Jan 14, 20 @ 4:01 pm:
I really wish people would start looking at and asking more questions about why the pension investment returns are so low when 2019 was an extremely strong year for returns in the market. I acknowledge some of the fund’s investments are in low-return instruments like bonds, but when the S&P 500 gains over 30% in 2019, I would expect to see above average investment returns. If we didn’t manage to claw back some of the deficit during a banner year like 2019, how do we ever think we’ll climb out of the hole?
- City Zen - Tuesday, Jan 14, 20 @ 4:02 pm:
Rome wasn’t burned in a day.
- Sue - Tuesday, Jan 14, 20 @ 4:07 pm:
Chambanalyst. The answer is Simple- the geniuses running investments at TRS have had an outsized allocation to hedge funds which for 10 years have negatively impacted returns. Why the Board continues with these investments is a great question seeing how many large pension systems have concluded Hedge funds are no longer worth the cost given their truly lousy returns
- JS Mill - Tuesday, Jan 14, 20 @ 4:07 pm:
=Rome wasn’t burned in a day.=
It was 40% funded in 1970.
.4% decrease in 50 years. That is a very slow burning Rome.
Might be down to 39% by 2070 errr, wait. By then all of the tier 1 people will be out of the system and it will be up quite a bit.
- Perrid - Tuesday, Jan 14, 20 @ 4:10 pm:
Was that expected? I know Rich has posted a chart before that shows the plan is for the pensions to get worse, for the unfunded liability to grow, until 2028, but was it supposed to grow that much?
Link to one post Rich put the chart on (doesn’t break out the different pension)
https://capitolfax.com/2018/12/12/where-were-heading-and-where-weve-been/
- Chambanalyst - Tuesday, Jan 14, 20 @ 4:11 pm:
Piggybacking on my previous comment. If my math is right, that’s only a 1.4% return for the year on the investment portfolio. That is so pitiful in a historic bull market it’s upsetting. Nearly every single funding model or projection assumes annual investment returns of 3-4%…and we could only manage 1.4%?? Bonds (Fixed income) only represent 25% of the portfolio. Public Equities and Alternative Investments account for roughly 1/3 of the portfolio’s weight, respectively. You’d have to be an atrocious stock picker to lose that bad on Public Equities in 2019. I’d love to know more about what’s included in “Alternative Investments”, because I just can’t wrap my head around what’s holding us back.
- Streamwood Retiree - Tuesday, Jan 14, 20 @ 4:12 pm:
@Sue
Finally you have posted something I can agree with.
The funds should be in a mixture of T-Bonds and S&P 500 index funds, similar to the Dederal governments C & G funds. T-bonds for near term needs, say five years of payout, index funds for the rest. Let the big brokerage houses bid for the funds and take the ones with lowest fees. Hedge funds are rip-offs. I suspect some kickbacks or self-dealing here.
- Donnie Elgin - Tuesday, Jan 14, 20 @ 4:14 pm:
population losses will lead to fewer classrooms of kids and less teachers - so we have that
- Dan Johnson - Tuesday, Jan 14, 20 @ 4:14 pm:
Tax pension income. Put it in the pension funds.
- My Button is Broke... - Tuesday, Jan 14, 20 @ 4:16 pm:
Chambanalyst - The S&P 500 was at 2793 on 7/1/2018 and 2996 on 7/1/2019 (the fiscal year in question). That’s an increase of 7.3%. Gains from the second half of 2019 will be reflected at the end of this fiscal year.
- lost in the weeds - Tuesday, Jan 14, 20 @ 4:20 pm:
The audit is year ended June 30, 2019.1 year s and p 500 performance was 8.22 percent on June 30, 2019.
- Phenomynous - Tuesday, Jan 14, 20 @ 4:24 pm:
Investment returns capture moments in time from June 30 to June 30. If you check the markets, you won’t see a 30% increase. Secondly, all investment returns and assumption changes are smoothed out over 5 years, so even if there were a 30% bump in one year, it wouldn’t have an immediate effect.
- Jocko - Tuesday, Jan 14, 20 @ 4:35 pm:
==tax pension income==
If you’re a state rep using an alias…you’ve got 89 (house & senate) votes to go.
- Sue - Tuesday, Jan 14, 20 @ 4:37 pm:
Folks- no reason to carry water for the bozos running the investment department. They publish returns by asset class. Real estate, private equity, bonds stocks ain’t the issue. It’s all in “alternative investments” a/k/a hedge funds. The folks at TRS are outliers in comparison to other large public pension programs virtually all the rest have exited the asset class
- Just Observing - Tuesday, Jan 14, 20 @ 4:42 pm:
This is not my expertise. My wife is in TRS and only in her early 40s — how concerned should we be??
- City Zen - Tuesday, Jan 14, 20 @ 4:52 pm:
==The new minimum teacher salary law will have an impact over time, contributions from active teachers will increase as their salaries go up.==
You do realize the resulting pensions will also increase?
==4% decrease in 50 years. That is a very slow burning Rome.
Illinois: Home of the 50-Year Tire Fire. Forwarding this to the Office of Tourism now.
- Sue - Tuesday, Jan 14, 20 @ 5:05 pm:
What’s really is as most a crime is that the markets are up almost 500 percent since the 2009 bottom of 666 on the S&P 500 yet the state investment returns over much of the last decade have lagged by substantial amounts even when compared to similar institutional funds. We have had 2 governors with investment expertise but neither have looked to exerting influence as to the State’s investments. I have advocated for 10 years to force the pension funds to hire a firm like Blackrock to oversee portfolios. Every dollar the funds fail to make on investments cost taxpayers multiples of that amount over the coming years. Where is the outrage
- Grimlock - Tuesday, Jan 14, 20 @ 5:38 pm:
City Zen, more tier 2 teachers every year.
- Sue - Tuesday, Jan 14, 20 @ 5:44 pm:
I am amazed at the way people on this blog have their heads buried in the sand. When you say their are more tier 2 teachers every day - the TRS builds its current and future populations into its actuarial models upon which today’s numbers are based. No matter what the State has done- the numbers get worse primarily because the investment returns are just God awful
- TinbyDancer(FKASue) - Tuesday, Jan 14, 20 @ 6:00 pm:
= …Hedge funds are no longer worth the cost given their truly lousy returns=
@Sue
Wow. I actually agree with you on this one.
Except I’d change”no longer” to “not”
- Anyone Remember - Tuesday, Jan 14, 20 @ 7:28 pm:
Other than our Gracious Host, is anyone in the Media reporting the increase is written into the Edgar Ramp? Bond Buyer? Greg Hinz? Certainly not The Center Square.
- Blue Dog Dem - Tuesday, Jan 14, 20 @ 7:54 pm:
If TRS,or any of the pension funds, would only buy Illinois bonds, we would be doing better than the current bunch at a $25 mil/yr savings.
- Really - Tuesday, Jan 14, 20 @ 8:52 pm:
The only solution at this point if you don’t want to get stuck with this bill as well is to exit the state. Just need to figure out where to go.
- RNUG - Tuesday, Jan 14, 20 @ 10:21 pm:
== This is not my expertise. My wife is in TRS and only in her early 40s — how concerned should we be?? ==
You and all taxpayers should be outraged at the poor returns by TRS.
As your personal / family situation, you shouldn’t be very worried. The IL SC has been consistent for 45 years that the pensions must be paid when due, and that there is no way to involuntarily (one sided) change the terms of the pension. One way or the other your spouse’s pension will be paid when they retire.
The most likely scenario that will directly affect your family is a bit higher State taxes over the next 20 years or so. Being cynical, your family will likely reap more back from the eventual TRS pension than you will pay in extra taxes.
The only other possibly bad outcome would be if Federal law were changed to allow states to take bankruptcy, but the odds of that are very, very small. Even if that occurred, the IL Constitution has made it clear the pension IS recognized as a contract. So Federal Contract Law would also have to be revoked … an event less likely than the Cubs winning the World Series every year for the next 5 years.
In other words, I wouldn’t lose any sleep over it.
- Snowman61 - Wednesday, Jan 15, 20 @ 7:31 am:
The other question we should be asking is why did Administration costs increase by 2.7 mil? I know it is small % of the overall increase but still, 2.7 mil is a big increase in costs for 1 year.
- JS Mill - Wednesday, Jan 15, 20 @ 8:25 am:
=When you say their are more tier 2 teachers every day =
@Sue- what I am amazed by is how you don’t understand the impact of Tier 2.
My guess is that you just refuse.
For the hard of understanding: Tier 2 members are building EQUITY into the pension system and not creating debt. They are paying their own way and paying down the debt.
Banned word.
- Glass Half Full - Wednesday, Jan 15, 20 @ 9:08 am:
According to the audit, investment income was $2.6 billion on 52.0 billion invested. That is just over 5%. Total portfolio went up .755 billion but that is net of benefits paid of 6.8 billion.
- 17% Solution - Thursday, Jan 16, 20 @ 8:14 am:
“That is just over 5%. Total portfolio went up .755 billion.”
So that is pretty good considering that it’s invested in low risk low volatility funds.