STUMP » Articles » Illinois Pensions: State Employees Retirement System (SERS) number-crunching » 26 May 2015, 06:59

For this week of number-crunching Illinois pensions, I’m starting with the State Employees Retirement System, which covers both state and local employees. According to the SERS history page:

At the end of FY14, SERS has 62,844 active members, and 53,478 retirees. The total actuarial value of assets amount to $13.316 billion, with an actuarial accrued liability of $39.527 billion. In comparison, at the end of FY13, SERS had 61,545 active members, and 51,994 retirees. The total actuarial value of assets amounted to $11.877 billion, with an actuarial liability of $34,720 billion.

Hmmm, those numbers don’t seem to match the ones I’m getting from the Public Plans Database.

For example, the PPD is showing that there are more annuitants than actives in recent years:

To be sure, it can be that some of those annuitants are not being counted among retirees, being widows/widowers or beneficiary children or the like. There is also the issue of divorced retirees whose ex-spouses also receive benefits.

So I already got thrown off the track, and went to the official comprehensive annual financial report — and the answer is right on page 2:

85,529 Total Membership

61,545 Active Contributing Members [matches]

…..

Benefit Recipients

51,994 Retirement Annuities [matches]

10,669 Survivors’ Annuities [OH LOOK]

2,387 Disability Benefits [THERE ARE ALL THESE PEOPLE]

Yeah, one often sees these numbers games. Yes, it’s nice to juice the retiree-to-active ratio like that so it seems that one is still smaller than the other. But the other benefits are also coming out of the fund.

It is kind of important to note that there are more people getting benefits out of the fund than are currently employed.

On the same page, I want to note something that I didn’t include above:

Contributions

$248,169,706 Employees

$1,531,932,137 Employer

…..

$1,799,965,655 Benefits Paid

[squint]

Here, let me do some simple math:

Total Contributions: $1,780,101,843
Total Benefits: $1,799,965,655

Contributions – Benefits = -$19,863,812

That’s negative.

Oh, to be sure, the assets should be throwing off cash as well, but let’s see how adequate the pension assets are, shall we?

Hmmmm. Less than 40% funded. I know I get all tetchy about the 80% fundedness thing, but 40% is AWFUL.

So far, I’ve been using the numbers from the Public Plans Database, so let me do a little of my own from my compilation of the development of the unfunded liability.

You can look at my work at this link.

But here is the final result, from the 30 years of history I have:

Some quick observations:

• Note that the purple bar indicating benefit increases went up a huge amount in the year ending 6/30/2003 — this was an early retirement bill under Governor Ryan. You remember him, right? He was the Republican Illinois governor who was convicted in 2006 based on corruption surrounding commercial drivers licenses. Not quite related, but the early retirement bill was passed before he left office in January 2003. Only one term and he managed to get his corruption in record time! That’s an active guy.
• The green bar indicating undercontributions to the plan is, indeed, the largest, and makes up 29% of the ending unfunded liability
• HOWEVER, as noted in an earlier post, the bar for the change in actuarial assumptions is mainly coming from the change in the valuation rate in both 2010 and 2014. The expected return on assets is now 7.25%, which is a bit different from the 8% which it used to be.

I am reading the 2014 CAFR, though, and I see this on page 32

[squint]

How do you get from a 5% rate of return to 7.25%?

(and yes, I see the valuation rate itself is 7.09% due to the effect of borrowing to make up gaps, but I don’t want to go down that rabbit hole right now.)

Let’s go to the Public Plans Database and see what they have on SERS’s rate of return:

Okay, both 5-year and 10-year horizons for public pensions investing is very short. But it seems to me that SERS is not performing very well.

So SERS was one of the worst of the state pensions in my Illinois data set, which is why I started here. But the other ones: TRS (teachers), SURS (universities), GARS (Illinois legislature), JRS (judges) are not doing very well. Actually, GARS is the worst of the set with a funded ratio of about 20%.

These numbers are awful. Even that puny COLA bill didn’t chew away at this problem very much.

Should be interesting to see what the 6/30/2015 CAFRs bring.

Compilation of Illinois posts