That may well happen in a few months since Governor Rod Blagojevich asked the state legislature to appropriate $215 million less in the year beginning July 1 than the pension systems’ actuaries have certified they will need, the Champaign (Illinois) News Gazette reported. The state’s pension contributions are required by a 1996 law that requires annual payments sufficient to cover 90% of their future pension liabilities by 2045.
Unless lawmakers change that law beforehand, the retirement systems for teachers outside Chicago, university employees, state employees, judges and members of the General Assembly have the power to demand that those annual amounts be paid even if the money was not set out in the budget enacted that year. “We would be derelict of our fiduciary duty if we didn’t,” Jon Bauman, executive director of the Teachers Retirement System told the newspaper. “We will have no choice.”
Every dollar the state fails to put into the pension systems in the coming year will be worth $14 by 2045 because of compound interest and investment growth, Bauman claimed.
Blagojevich has proposed putting $215 million less into the pension systems over each of the next four years. According to reports by the actuaries of each of the pension systems, if the state were to make the $860 million in contributions the governor plans on skipping, that money would be worth $11.8 billion by 2045. For its part, the administration insists it is not really skipping the payments because it gave the pension systems $860 million more than it had planned to after last year’s $10 billion pension bond sale.
While he has not made a public announcement about it, the governor has appointed a special commission to help craft the alternative pension funding plan. That group is scheduled to meet Friday in Chicago.