SPRINGFIELD – Democratic Gov. J.B. Pritzker’s pension proposal is not sitting well with state lawmakers, an advisor to the Illinois Teachers Retirement System told its Board of Trustees this week.
The governor’s plan is to reduce payments to the various pension systems by $850 million next year, while extending by seven years the time it will take to pay off $134 billion in unfunded liabilities.
While the plan appears unpopular now, Andrew Bodewes, the board’s legislative liaison, said that could change as the end of the session draws near and lawmakers have to consider the other options.
“I don’t want to suggest that the majority of the General Assembly could ever get to a place where they’re OK with reducing pension payments by $850 million,” Bodewes told the board during its annual retreat Thursday in Springfield. “But when they start looking at, ‘We’re going to cut schools by this, we’re going to close these parks; We’re going to reduce these services to children with learning disabilities,’ it starts to get real. Those conversations get very real. So I’m always sympathetic to the members.”
Pritzker made that proposal as part of the budget package he submitted to the General Assembly earlier in the session, and it was only one part of a multi-pronged proposal to address the state’s long-term unfunded pension liability.
Reducing payments into the systems is intended to free up general revenue funds for other purposes such as increasing funding for K-12 and higher education, hiring more social workers for the Department of Children and Family Services, and increasing reimbursement rates for certain Medicaid providers.
But he has also proposed issuing what are called “pension obligation bonds” to pay down part of the unfunded liability, transferring surplus state assets to the pension funds and earmarking a portion of the revenue the state would receive from his proposed graduated income tax to pay down pension debt.
The Teachers Retirement System is the largest of the state’s pension funds, with $52 billion in assets and 417,000 members.
Under current law, the state is responsible for paying just more than $4.8 billion into the fund this year. That would be about 12 percent of Pritzker’s entire general revenue fund budget proposal for the upcoming year. Currently, though, it has only about 40 percent of the assets it would need to pay off all of the obligations it has already accrued.
Current law calls for gradually paying down the unfunded liabilities through 2045, when the systems are expected to be 90 percent funded.
In March, the TRS board unanimously approved a statement urging lawmakers to reject any proposal to reduce scheduled payments or lengthen the schedule for paying down the liabilities.
“The system is at a growing risk of insolvency in the event of an economic downturn,” the board said in the statement. “This danger is the direct result of eight decades of state contributions that always have fallen far short of actuarially based funding.”