He said the board has a fiduciary obligation to do “what is best for the financial sustainability” of the fund and that its action to lower the rate can be overridden by the Illinois Legislature.
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Gov. Bruce Rauner’s administration says a pending move by Illinois’ largest public-pension fund could increase the state’s required payment by hundreds of millions of dollars.
It’s an increase that could lead to higher taxes or massive cuts to education and social services already in financially dire shape because of a historic budget standoff and multibillion-dollar state deficit.
The Teachers’ Retirement System (TRS) board, acting on recommendations from its actuarial consultant, voted to lower the rate, a move that will trigger an increase in the state’s almost $3.9 billion payment to the fund for the fiscal year that began on July 1.
“Quickly voting, making a decision that could impact taxpayers in IL to the tune of hundreds and hundreds of millions of dollars every year, that decision should not be taken quickly and should not be taken without a lot of transparency”, Rauner said the day before the vote.
An actuary firm recommended the move because of expectations of a nationwide reduction of inflation.
Lowering the rate will increase the amount the state has to contribute to the hugely underfunded account.
Illinois’ total fiscal 2017 pension payment to its five retirement systems was pegged at $7.9 billion, up from $7.617 billion in fiscal 2016 and $6.9 billion in fiscal 2015, according to a March bipartisan legislative commission report. Rauner’s administration says a pending move by Illinois’ largest public-pension fund could increase the state’s required payment by hundreds of millions of dollars.
The move means IL will have to pay $421 million more next year into the pension fund. But only two were seated, and both abstained from the vote.
The board’s action means consultant Segal will come back with more concrete numbers this October, which will then be included in a final report to the legislature and the governor November 1.
“No one should think we’re being insensitive”, said TRS Executive Director Dick Ingram.
Other retirement systems have fallen short of targets after US stocks fell a year ago, followed by a rout in equity markets overseas.
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Republican state Senate leader Christine Radogno, a key Rauner ally, said she agreed the system should lower its rate when it did so in 2014, and it may need to do so again.
