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State pension payments projected to hold at 20.1 percent of state expenditures over five years

Wednesday, Nov 16, 2022 - Posted by Rich Miller

* Let’s go back to the state’s Economic and Fiscal Policy Report that the administration is required to submit to the General Assembly each year. I posted the walk-down on Monday, but I wanted to look closer at pension payments, since the usual suspects are beating that particular war drum again.

Here are the annual projected state payments for the Teachers Retirement System, the State Employees Retirement System and the State University Retirement System by fiscal year. Dollar amounts are in millions

    FY23 $9,632
    FY24 $9,789 (+1.6%)
    FY25 $10,051 (+2.7%)
    FY26 $10,317 (+2.6%)
    FY27 $10,514 (+1.9%)
    FY28 $10,884 (+3.5%)

Pension payments are estimated to be 20.1 percent of all expenditures this fiscal year and they’re projected to be 20.1 percent of all expenditures in five years.

Of course, that’s only if the current projections hold, which they sometimes don’t. Back in 2019, FY23’s projected state pension contribution was projected to be 20.4 percent of all state expenditures.

That’s obviously manageable.

* The problem is that projected expenditures will start outpacing projected revenues in FY25 by $464 million, and that gap will widen to $792 million by FY28. But those are small percentages and also include annual $80+ million in rainy day fund contributions. But even with those contributions, the budget deficit in FY25 is projected to represent just 0.9 percent of overall spending, and it’ll be 1.5 percent of spending by FY28.

Still, without a new revenue source, this means the state will have to keep a rein on spending.

       

24 Comments »
  1. - Oswego Willy - Wednesday, Nov 16, 22 @ 1:55 pm:

    ===Pension payments are estimated to be 20.1 percent of all expenditures this fiscal year and they’re projected to be 20.1 percent of all expenditures in five years.===

    “Yeah… but, but… but year six Illinois will go bankrupt and it’ll collapse the state… and everything”

    - IPI, Wirepoints… probably.

    To the post,

    Managing what can be managed while seeing actual numbers that can be reached by fiscally sound decisions is a good thing.

    The next steps will be the actual managing these budgets and numbers within these figures.


  2. - Big Dipper - Wednesday, Nov 16, 22 @ 2:07 pm:

    Yeah last week in its post-election editorial the Trib was still engaged in nonsensical screeching about pension reform, i.e., illegally reducing promised benefits.


  3. - Ares - Wednesday, Nov 16, 22 @ 2:12 pm:

    As the baby boomers age and pass on, so will this issue, though it will take a few decades to decrease. One should be more worried about Social Security and Medicare.


  4. - Dr. D - Wednesday, Nov 16, 22 @ 2:16 pm:

    Keep in mind those amounts are the statutory funding amounts, which fall far short of the actuary recommended amounts. TRS alone falls about $3.5 billion short ($6.04B statutory funding vs $9.59B actuary recommended) in 2024. And given the current state of the stock and bond markets, the shortfalls are going to grow substantially in the coming years. Until the state gets to the level of funding that is actuarially recommended, the hole just keeps getting deeper.


  5. - Big Dipper - Wednesday, Nov 16, 22 @ 2:18 pm:

    Also the pension reform brigade has dropped the talking point about the “generous” 3 percent annual increase.


  6. - Candy Dogood - Wednesday, Nov 16, 22 @ 2:24 pm:

    This was the plan when the State decided to not pay employer payments into the system intentionally. Even now the Governor prefers to direct surplus revenue into a rainy day fund rather than buying salt before the forecast winter storm by throwing these surplus revenues into the pension funds now which will help to offset the expense down the road.


  7. - A - Wednesday, Nov 16, 22 @ 2:24 pm:

    Thanks for bringing up those luxurious, outrageously extravagant 3% increases, Big Dipper. Wondered what happened to that claim from the Social Security clubbers now that they’re getting 8.7% (2023) and 5.9% (2022) Sounds extravagant to me……


  8. - Cool Papa Bell - Wednesday, Nov 16, 22 @ 2:24 pm:

    Great I’ve got to wait 5 more years to the economic collapse of the state. I’m getting tired of waiting.


  9. - Norseman - Wednesday, Nov 16, 22 @ 2:26 pm:

    Speaking of 3% annual adjustment, this year’s inflation rate is an example of why the legislators didn’t want to tie the adjustment to it. That was a wise decision when inflation was a consistent problem, however, not many expected it to be so low for many years.


  10. - Baloneymous - Wednesday, Nov 16, 22 @ 2:36 pm:

    I hope the super-super majority House and super majority Senate members are constantly reminded of this all during session next year before they start proposing a bunch of new spending. We are finally getting our fiscal house is order after so many years, please don’t mess this up.


  11. - levivotedforjudy - Wednesday, Nov 16, 22 @ 2:43 pm:

    My colleagues hate it when I bring up Ares’ point (sort of morbid), but it is pretty obvious that it should play out that way.


  12. - Honeybear - Wednesday, Nov 16, 22 @ 2:43 pm:

    You know I’m wondering. I have a chunk taken out of every paycheck for my pension. Is the fact that we are down over 7 thousand workers factored into that? That’s gotta effect funding wouldn’t it?


  13. - Obamas Puppy - Wednesday, Nov 16, 22 @ 3:07 pm:

    Is there any doubt at this point that the attacks on pensions are nothing more than ways to undermine labor unions and continue a tax structure that favors the privledeged?


  14. - Jump - Wednesday, Nov 16, 22 @ 3:09 pm:

    Feed the pension beast..i need it.


  15. - Mars - Wednesday, Nov 16, 22 @ 3:10 pm:

    To my knowledge, none of the retirement systems have mortality table assumptions that factor in COVID-19. They use the Scale MP-2020, which contains population data up to 2018. The yet to be adopted MP-2021 also doesn’t factor in COVID and proposes an increase in overall life expectancy. Recent CDC data has shown steep declines in life expectancy due to COVID in 2020 through 2022. Whenever the systems adopt new tables there will likely be a reduction in the state’s contribution because of the impact of COVID.


  16. - Oswego Willy - Wednesday, Nov 16, 22 @ 3:15 pm:

    - Jump -

    They are making the payments.

    The adults are talking about what that means during the next five years and after.

    Facebook, IPI or Wirepoints enjoy drivebys like that. They think it’s fun.


  17. - thechampaignlife - Wednesday, Nov 16, 22 @ 3:53 pm:

    ===Until the state gets to the level of funding that is actuarially recommended, the hole just keeps getting deeper.===

    This is incorrect. The funding ratio for TRS increased 2 points in FY21 to 42.5%, and the unfunded liability dropped $800M to $79.9B. At that pace, they will reach 90% funded by 2045. Right on schedule with the Edgar Ramp. Whether you measure by funding percentage or total dollars unfunded, the hole is being filled. Slow and steady for 22 more years and this is all over. As designed. By a Republican, no less.

    Source: https://www.trsil.org/news-and-events/FY23-State-Contribution-Approved


  18. - SAP - Wednesday, Nov 16, 22 @ 3:57 pm:

    ==As the baby boomers age and pass on, so will this issue, though it will take a few decades to decrease.== True, but Tier I employees retiring and getting replaced by Tier II employees will have a more rapid impact.


  19. - MisterJayEm - Wednesday, Nov 16, 22 @ 4:49 pm:

    “without a new revenue source”

    Hmmm…

    We’ve successfully legalized sports betting…

    And we’ve successfully legalized weed…

    [googles “regulated peyote escort services”]

    – MrJM


  20. - JS Mill - Wednesday, Nov 16, 22 @ 5:18 pm:

    =Also the pension reform brigade has dropped the talking point about the “generous” 3 percent annual increase.=

    That is just a coincidence,now that SSI COLA is 8.7%, I am sure. /s


  21. - Big Dipper - Wednesday, Nov 16, 22 @ 5:47 pm:

    There are Gen X folks who are Tier I as well.


  22. - Stuck in Celliniland - Thursday, Nov 17, 22 @ 8:04 am:

    ==There are Gen X folks who are Tier I as well.==

    And some older Millenials too, who were hired before 2011.


  23. - bmcosti - Thursday, Nov 17, 22 @ 11:10 am:

    20.1 percent of revenues? That’s outrageous and completely out of line with most other states. It’s nearly quadruple the average of other states.


  24. - Rich Miller - Thursday, Nov 17, 22 @ 11:11 am:

    === It’s nearly quadruple the average of other states.===

    A century of deliberate underfunding will do that.


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