The state’s governor’s office confirmed to the Journal that the Illinois inquiry is focused on public statements concerning an overhaul measure passed in 2010 meant to help shore up the retirement system. The governor’s spokeswoman, Kelly Kraft said the state is cooperating with the inquiry and feels its “disclosure was always accurate and complete.”
According to the Journal, an issue being examined is whether Illinois was taking future savings and treating them as current reductions in the cost of the pension fund, said Robert Kurtter, a managing director in the public finance division at Moody’s Investors Service, who said his firm spoke with Illinois officials about the inquiry. One of the measures that Illinois took to save costs was to raise the retirement age for newly hired Illinois workers.
Kraft said Illinois has included mention of the SEC inquiry in documents being prepared for the sale expected in the next few weeks of a approximately $3.7 billion bond offering. The debt is expected to allow the state to make a required pension-fund contribution.
Illinois’s pension system is only about 50% funded with liabilities of about $136 billion, according to Moody’s. The news report said the underfunding, one of the worst among states in the nation, is partly the result of the state frequently skipping its recommended contributions to fund.Last August, in an action meant to send a loud and clear signal that “funny money” accounting of pension fund liabilities would not be tolerated, the Securities and Exchange Commission (SEC) charged the State of New Jersey with securities fraud (see Running the Fund:Jersey Sure?).