Teacher pension adjustment could cost hundreds of millions

Illinois taxpayers can expect to pay for decades of poor financial decisions. That’s the message from Teachers’ Retirement System (TRS) Executive Director Richard Ingram after Friday’s vote to lower the expected rate of investment returns for the pension fund.

The TRS board was unanimous – with the exception of two new gubernatorial appointees abstaining – in lowering the rate of return from 7.5 percent to 7 percent. That means the state can expect to pay upwards to half billion dollars more into TRS.

Ingram said the rubber is meeting the road. “The first five or six decades you could sort of ignore it because the numbers weren’t that big but now the numbers have cascaded to be so big that you can’t walk away from it anymore.”

During the hours-long meeting of the board, Ingram suggested the rate of return actually be lowered further this spring.

“I’m going to be very interested to see as we go through the year and as we go through our asset allocation review and that involved fairly detailed dives into the capital markets assumptions from a pure investment point of view that I think we’ll see evidence that might support something lower.”

At 7 percent, taxpayers would be expected to pay an extra $420 million next year into the pension funds, based on fiscal year 2015 numbers. However, Illinois still lacks a full year budget and one will not be decided on until after the November elections.

Ingram said he doesn’t yet see the rate lowering to 4 percent as some of his colleagues around the country have suggested.

The board’s action means consultant Segal will come back with more concrete numbers this October, which will then be included in a final report to the legislature and the governor Nov. 1.

The state legislature has the final say on how much taxpayers will put into TRS come budget time.

–Illinois News Network

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