Pension Funding On Track in New State Budget

The Illinois General Assembly and the Governor have honored their obligation to fully fund the five state pensions systems for the 2008 fiscal year that began July 1. Illinois’ new state spending plan contains $2.1 billion for the five state pension systems, including a $1.04 billion appropriation to the Teachers’ Retirement System (TRS). These amounts are required under a statutory plan designed to bring the state pension funds to a 90 percent funded level in 2045.

Illinois’ $42.2 billion unfunded pension liability has grown because of the state’s chronic history of shortchanging the pension funds, amounts that must be repaid plus interest compounded annually. The pension debt is a result of the state failing to make full pension payments over the past three decades and not because retirement benefits are overly generous.

The average annual benefit for all 79,728 retirees in the Teachers’ Retirement System is $40,128. Public school teachers in Illinois do not collect Social Security, often making their TRS benefit their only source of retirement income. TRS members contribute 9.4 percent of their income, which is among the highest contribution rate in the nation among public pension plans for teachers. In fiscal year 2007, investment income accounted for 80 percent of all TRS revenue, while member contributions comprised 10 percent, and the employer share, which includes state contributions, accounted for 10 percent of all revenue.

Despite many other spending pressures this year, the Governor and the General Assembly have made state pension funding a priority; a practice that, if continued, will bring long-term financial stability and benefit generations of Illinoisans who will not be saddled with the pension debt.

It takes fiscal discipline and sacrifice to correct the poor spending practices of yesterday to ensure the state can meet its future financial obligations. The funding earmarked for public pensions in the new state budget is a responsible step towards achieving that goal.