“These amounts must be repaid to the retirement systems with interest. If $1.3 billion is cut from TRS during fiscal year 2010, it will cost the state $5.8 billion over the 35 years remaining in the statutory funding plan,” said Jon Bauman, executive director of the Teachers’ Retirement System, in a statement. “The funding reductions hit particularly hard because of the systems’ recent investment losses caused by extreme volatility in the global financial markets,” Bauman said.
According to the statement, Governor Pat Quinn has proposed a $2.5-billion reduction in state funding to the five state pension systems for the fiscal year that begins July 1, including a $1.3-billion cut to the TRS. In addition, the budget blueprint calls for the state to suspend its payments to the pension systems as of March 31, 2009, eliminating $362 million due to TRS in the current fiscal year.
The proposed cuts would exacerbate the state’s $73 billion pension debt, of which $41 billion is the Teachers’ Retirement System’s share, TRS said. The teacher’s system is urging the Illinois General Assembly to comply with current state law requiring actuarial funding amounts designed to pay off most of the state’s pension debt by fiscal year 2045.
The system claims the state’s pension debt is mainly a product of insufficient state funding over a period of three decades, including during fiscal years 2006 and 2007 when the state deviated from its statutory funding obligation and cut $2.3 billion in funding to the retirement systems, and is not due to overly generous benefits. The average retirement benefit paid by TRS totals $41,500 a year. TRS pointed out that public school teachers in Illinois do not receive Social Security, often meaning their TRS benefit is their only source of retirement income.
The Governor’s budget plan also calls for current active members of TRS to pay an additional 2% of their pay toward retirement, a provision that is considered an impairment of benefits and prohibited under the Illinois and U.S. Constitutions, TRS charged. TRS members currently contribute 9.4% of their income – among the highest contribution rates in the nation among teacher pension plans
TRS provides retirement, disability and survivor benefits to 355,584 teachers, administrators and Illinois public school personnel employed outside the city of Chicago. The market value of the system’s assets stood at $29 billion as of December 31, 2008.