Stock market gains not enough to fully fund Illinois pensions
Monday, March 14, 2011
The stock market’s turnaround in 2010 brought more money into the Illinois retirement systems’ coffers, but the bull market wasn’t enough to make a substantial dent in their $75 billion unfunded liability.
A Register Star analysis of the five state-funded pension plans shows they earned a collective $7 billion from investments in their 2010 fiscal years, which ended June 30. The Illinois Municipal Retirement Fund, which covers local governments outside of Cook County but does not receive state funds, earned an additional $3 billion.
Despite the gains, the unfunded liability for the five state funds jumped 21 percent in 2010, from $62.4 billion to $75.7 billion, according to a report from Illinois Auditor William Holland. Those figures take a five-year “smoothed” view of the funds’ income and expenses; based on a fair-value analysis, the unfunded liability rose from $77.8 billion in 2009 to $85.6 billion in 2010.
Pension funds receive funding from three sources: the employers, employees and returns from investments. Generally, contributions from employers and workers are invested in the market, and the returns on those investments provide the bulk of a pension plan’s income.
Illinois funds pension plans for state employees, university employees, legislators, judges and teachers. For decades, the funds have been plagued by underfunding from the state Legislature, although a growing chorus of civic reform groups have criticized the plans for providing overly generous retirement plans to their members.
The financial storm over pension funding led the Legislature to pass a law creating a second, less expensive tier of benefits for employees hired as of Jan. 1. The new tier does not address current employees’ retirement annuities, however, although Speaker of the House Mike Madigan has hinted he’d be willing to address such a change.
Last month, the state issued 3.7 billion in bonds to reduce the state’s debt to its pension funds.