Fiscal Focus

              Illinois’ state pension systems continue to
be seriously underfunded with the latest
calculations placing the unfunded liability
at over $40 billion. As of June 30, 2006,
the five pension systems primarily sup-ported
by the state (the Downstate Teach-ers’
Retirement System (TRS), the State
Universities Retirement System (SURS),
the State Employees’ Retirement System
(SERS), the Judges’ Retirement System
(JRS), and the General Assembly Retire-ment
System (GARS)) had accumulated
$103.1 billion in actuarial liabilities for
pension, disability, and death benefits.
The systems held assets valued at $62.3
billion leaving $40.7 billion in unfunded
obligations, or a funded level of only
60.5%.
The systems currently have sufficient
assets and income to easily meet obliga-tions
for the foreseeable future. In fiscal
year 2006, the systems spent $5.3 billion for
benefits, refunds, and contributions. Mem-ber
and state contributions only totaled $2.3
billion; however, an additional $6.7 billion
was earned in investment income from a
healthy world equities market leading to a
$3.7 billion increase in pension assets for
the year.
However, pension systems by their nature
need to plan for the distant future. Bene-fits
being promised today to employees in
their twenties and thirties may not actually
be paid for forty or fifty years. Above
average investment returns cannot be
expected every year and actuaries have
calculated there will be a steady and size-able
increase in required benefit payments
as members of the baby boom generation
retire and as life expectancies continue to
rise.
Funding Policy for Illinois’
Pension Systems
A look at the history of state contributions
to the state pension systems indicates that
the problem was aggravated by budgetary
policy regarding state contributions
between fiscal year 1981 and fiscal year
1995. Through fiscal year 1981, the budg-etary
policy for funding pensions was to
have the employers’ contribution pay the
benefits, while the employees’ contribu-tions
and investment income were dedi-cated
to building a reserve for future pay-ments.
Although this funding plan had no
relation to actuarial calculations of liability,
it did guarantee a steady increase in state
contributions.
During a period of fiscal stress, this policy
was abandoned in fiscal year 1982 with
repercussions notable today (see graph on
page 5). State contributions declined
sharply in fiscal years 1982 and 1983 and
only increased modestly through fiscal
year 1995. State contributions were $406
Cover Story ..........................front, 5, 8-10
Letter From The Comptroller ................... 2
Chicago Transit Authority’s
Pension Obligations......................... 2, 13
Illinois Pension Benefits Lower
Than Most States...................................3, 6
State Government Workforce
Getting Older ............................................ 4
Rules Changes Shed Light on Other
Retirement Liabilities....................... 7, 13
States Attempt to Change Pension
Plans..................................................11, 12
December 2006 Tables ......................... 14
January 2007 Tables............................. 15
Did You Know..........................Back Cover
In This Issue:
• JANUARY/FEBRUARY 2007 ISSUE •
Illinois State Pensions Continue to
Put Pressure on the State Budget
A Publication of the Illinois State Comptroller
Fiscal Focus
Cover Story continued, page 5