Not a single one of the state’s five public pension systems earned more than 1% returns on their investments last year. In fact, two of the five funds actually lost money.

Although pension trustees predicted Illinois’ five pension funds would earn more than $5.1 billion in fiscal year 2012, the funds actually earned less than $239 million. The systems posted a combined investment return of just 0.38%, far below the combined 8.18% expected.

TRS-Teachers Retirement System

SURS-State Universities Retirement System

SERS-State Employees Retirement System

JRS-Judges Retirement System

GARS-General Assembly Retirement System

Unfortunately, when investment returns come in under projections it falls on taxpayers to make up the shortfall. The nearly $5 billion of missing investment income will be added to the unfunded liability, and state taxpayers will be paying more and more money during the next 30 years to make up for the poor returns.

Ultimately, there are only two numbers that matter: the amount of money the pension funds will pay out for earned benefits and the amount of money it has on hand. Between now and 2045, the five state pension systems are scheduled to pay more than $600 billion to retired government workers. They have just $62 billion on hand.

The simple fact is that the pension systems are broke. Under new accounting rules, the funds have less than 29% of the money they should have in the bank today to make their pension payments. None of the five systems even have enough money on hand to pay out benefits to government workers who have already retired, let alone those still working.

The longer lawmakers delay action, the worse Illinois’ pension debt crisis will become. Only major reforms, like moving to defined contribution plans for all future work and tackling the automatic, compounded cost-of-living adjustment can get the problem under control.

Jonathan Ingram
Director of Health Policy and Pension Reform
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