STUMP » Articles » Illinois Governor's Race: The Looming Pensions Problem » 22 October 2014, 10:16

In two prior posts, I rounded up some stories about a newspaper endorsement for the Republican candidate for Illinois governor, waiting for something from Rich Miller at CapitolFax.

I searched around on Miller’s site, and on Crain’s, where I had linked some of the commentary, but all I found was this round-up post, which noted this little brou-ha-ha is getting little play.

I can see why Miller might be expecting more of an uproar — after all, media people tend to over-cover media-related stories due to their own direct interest. However, and I think Rich Miller and others realize this, there are far bigger problems in Illinois than some issue about a reporter with a politically-active wife getting sidelined for a short period.

Namely: the pensions problem.

Just for a quick taste, here are some of my prior posts on Illinois’s (and specifically, Chicago’s) pension problems:

• Public Pensions Watch: Rauner for Republicans in Illinois
• Illinois Law v. Reality
• Chicago Faces Doom
• Chicago Still Faces Doom
• Don’t Get Your Hopes Up, Chicago

Yes, Chicago gets heavy play, but it’s not the only municipal pension in trouble in Illinois. It’s just the largest one, of all the city-based pensions.

As for the state-based pensions, the teachers pension is in pretty bad shape. Some good, but dated information can be found here on Ballotpedia. Sure, the politicians’ pension has a lower funded ratio, but the issue is that there are far more teachers than politicians.

The most recent CAFR (comprehensive annual financial report) I can find on this pension is for the fiscal year ending June 30, 2013. So one year newer than the Ballotpedia numbers.

Here are some important numbers from that report:

• Funded ratio in 2013: 41%
• Funded ratio in 2004: 62% (it reached a peak of 64% in 2007, and has been decreasing since)
• Number of active members (i.e., still working): 161K
• Number of inactive members (not contributing to TRS, not retired yet): 120K
• Number of benefit recipients: 109K

But the asset returns have been so good! (recently) How can we have a deterioration of funded status?!

Well, If you go back to Ballotpedia, you will see this chart:

Take a look at the percentage of the “required” contribution that was actually contributed. They have never made a full contribution in the past 5 years — this is true of the Illinois pensions shown, and true about basically every public pension in trouble.

Almost always, the primary problem for pensions is undercontribution. And if you undercontribute every year, sometimes by huge gaps, the funded status will deteriorate.

So, the two candidates for Illinois governor have to deal with this. Quinn has already tried over his term, with little effect. Yes, they crammed through some legislation, but if the Illinois Supreme Court rules the pension cuts to be unconstitutional, what then? Some are talking of amending the state constitution, but given how hard it was just to pass legislation, amending is going to be even tougher. Here, one proponent for pension reform is trying to think this through.=

So no, who cares about some reporter when you have a problem of billions of dollars hanging over the heads of the gubernatorial candidates. I am not saying Rauner shouldn’t be dug into – he should be, and there are plenty of stories running on Rauner’s past activities. Illinois definitely doesn’t need another corrupt governor, so some stories on past behavior can be pertinent.

But, giving the impending fiscal disaster, it seems to me that people are, indeed, focusing more on that than the specifics of the two men.

But we shall see come November 4.

Compilation of Illinois posts