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Unfunded pension liability rose, but state payments still scheduled to fall slightly

Thursday, Dec 8, 2022 - Posted by Rich Miller

* Bloomberg

Illinois’s debt to its employee retirement funds rose as the pensions were hammered by investment losses, erasing some of the bull-market gains that briefly chipped away at the state’s obligations.

The unfunded pension liability across Illinois’s five retirement systems rose 7.5% to $139.7 billion in the fiscal year that ended in June, based on the market value of their assets, according to a report from the Illinois Commission on Government Forecasting and Accountability on Thursday.

* But there’s also this in the report

At the end of FY 2021, the aggregate unfunded liability based on the actuarial value of assets was approximately $139.9 billion. A year later, it stood at $139.0 billion as of FY 2022. The combined unfunded liability dropped by $848.4 million during FY 2022, a 0.6% decrease, compared to FY 2021.

As shown in Chart 4, the primary contributor to this decrease was due to positive actuarial investment returns. Although all five systems reported negative rates of return on market value investments, through statutorily- required asset smoothing, actuarial values of investment returns resulted in overall gains for each retirement system. This actuarial gain is equivalent to approximately $787 million in investment returns for FY 2022. Other factors in the overall decrease in aggregate actuarial unfunded liability included a $511 million actuarial gain from changes in actuarial assumptions, a $232 million gain in changes in demographics and other factors, and a $256.3 million gain from the effect of the buyout provisions pursuant to P.A. 100 -0587.

SERS experienced an actuarial gain of $877 million in FY 2022 due to actuarial assumption changes tied to their statutorily-mandated experience study for the fiscal year ending June 30, 2021. The following assumptions were modified as a result of the experience study: salary increase assumptions, mortality assumptions, and other demographic factors, including normal retirement rates, early retirement rates, and turnover rates, among other factors. SERS reported a $176.0 million actuarial gain from the buyout programs. The system also reported an actuarial gain of $304 million due to favorable demographic factors.

* And state payments are scheduled to go down again next fiscal year

FY 2024 estimated State contributions were certified by the Boards of trustees of the five systems. FY 2023 State contributions to the five systems were $10.98 billion. The FY 2024 State contributions are estimated to be $10.94 billion, a decrease of $39.6 million or 0.04% over FY 2023.

The General Funds decrease will be $38.2 million.

* Also, if you look at the report, the state pension payment is at 49.4 percent of payroll in this fiscal year. It’s projected to be 48.4 percent in ten years and then go up to 51.5 percent, where it will essentially remain until 2045.

       

8 Comments
  1. - Give Us Barabbas - Thursday, Dec 8, 22 @ 3:05 pm:

    They did better than me; my deferred Comp really took it in the shorts this past spring/summer. I mean, really, really bad. Life-changing bad.


  2. - Anyone Remember - Thursday, Dec 8, 22 @ 3:12 pm:

    In FY 2021, special funds were budgeted at just over 54% of payroll.


  3. - JS Mill - Thursday, Dec 8, 22 @ 3:41 pm:

    =They did better than me;=

    Yes, but if you were getting SSI, wow did they have a big year. ACtually the last two years.


  4. - Sue - Thursday, Dec 8, 22 @ 4:23 pm:

    Tracking the unfunded liabilities quarter by quarter month by month or year by year is a total waste of time. The State will never achieve the statutory funding levels yet the payments will continue to be paid to the annuitants. What Illinois should do is revise the legislated payment schedule to limit pension contributions to no more then 25 percent of total State revenues so other programs are
    Not starved of revenues-


  5. - Rich Miller - Thursday, Dec 8, 22 @ 4:24 pm:

    ===limit pension contributions to no more then 25 percent of total State revenues===

    They’re at 21 percent now. But a statutory change like that would undoubtedly tank the bond rating, so we’re pretty well stuck.


  6. - Oswego Willy - Thursday, Dec 8, 22 @ 4:33 pm:

    ===What Illinois should do is revise the legislated payment schedule to limit pension contributions to no more then 25 percent of total State revenues so other programs are
    Not starved of revenues===

    Isn’t one of the reasons governments, in practicality, can’t be bankrupt is that they have the power to tax, so limiting what contribution could be, doesn’t that inhibit the ability to tax, or worse forces undue tax burdens to be below that “magic number”

    That doesn’t sound like a smart way to run a railroad.


  7. - PublicServant - Thursday, Dec 8, 22 @ 6:01 pm:

    Wait. Sue want’s to kick the can down the road? Who’d a thunk? There wouldn’t have been a can to kick down the road either by the way, if the state hadn’t used pension payments as a piggy bank to keep Sue’s taxes so low for so long. But you do you, Sue.


  8. - Jack Mabley - Thursday, Dec 8, 22 @ 9:17 pm:

    Hopefully we can find a way get more tax revenue .The good news is pensions are not taxable so the 3% cola goes to the bottom line . Maybe tax non public employee pensions to raise revenue but there are not many of those left


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