(The Center Square) – Illinois legislators are discussing a measure that aims to provide an additional $500 million a year for the state’s pension systems to address unfunded liabilities.
The state manages five pensions funds. The Teachers’ Retirement System covers retired teachers from across the state with the exception of Chicago. Combined with TRS, the State Universities Retirement System, the state Employees’ Retirement System, the Judges’ Retirement System and the General Assembly Retirement System have an unfunded liability of at least $140 billion. They are funded about 42% of what their overall obligations are. The pension system for lawmakers is the worst funded at about 19%.
House Bill 4098 would allow the Illinois treasurer and comptroller to transfer $500 million from the General Revenue Fund to the Pension Unfunded Liability Reduction Fund each fiscal year. The funds would be used for making additional contributions to the pension funds for retired state employees. The current budget already spends around $10 billion this year on pensions. That accounts for around one out of every five dollars the state takes in taxes.
The House Personnel & Pensions Committee discussed HB4908 Wednesday in downtown Chicago along with officials from the Teachers’ Retirement System and State Employees’ Retirement System.
The Teachers’ Retirement System currently has a total unfunded pension liability of around $80 billion among two different tiers of employees. Tier 1 is for those in TRS before 2011. Tier 2, with fewer benefits, is for those hired after 2011.
Andrew Bodewes of TRS told the committee if things stay the same, it will be 2085 before TRS has no one left in Tier 1.
The State Employees’ Retirement System is 44% funded.
The most recent audit for the fiscal year that ended June 30, 2021, shows SERS with around $30 billion unfunded liability, a funding ratio of 42%.
State Rep. Steven Reick told The Center Square that this is the first time since he’s been in office that a plan for addressing pensions has been formed.
“We’re starting, and that is something that hasn’t been done since I’ve been in the General Assembly,” Reick said. “We’ve actually taken the bull by the horns and have started to actually make plans for how we are going to fix this thing.”
One issue legislators are evaluating is modifying the benefits for Tier 2 retirees. TRS officials stated that the Tier 2 benefit would not meet the Social Security safe harbor benefit requirement, which could lead school districts to make up the difference. That could put more pressure on Illinois’ already high property taxes.
During a committee hearing, state Rep. Carol Ammons, D-Urbana, said if they don’t address Tier 2 pensions, those employees could “take recourse” against the state, which would result in “costing the state more in the long run.”
State Rep. Stephanie Kifowit, D-Oswego, told The Center Square that the Tier 2 issues are being addressed through HB4098.
“This is the first time ever that we have had a bill that discusses Tier 2 to this depth,” Kifowit said. “There’s been side conversations, but this is truly momentum going in the right direction.”
Legislators plan to work on the measure throughout the summer and attempt to get the bill read and passed during the next legislative session.