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Presented by:Dan Hankiewicz, Pension Manager
Commission on Government Forecasting and Accountability703 Stratton Office Building; Springfield, Illinois 62706
January 27th, 2012
Financial Condition of the State Retirement SystemsFY 2011
Budgeting for Results Commission
Presented to:
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CGFA Background & Responsibilities
• Bi-Partisan, joint legislative commission, provides the General Assembly with information relevant to the Illinois economy, taxes and other sources of revenue and debt obligations of the State.
• Preparation of annual revenue estimates with periodic updates;
• Analysis of the fiscal impact of revenue bills;
• Preparation of State Debt Impact Notes;
• Periodic assessment of capital facility plans;
• Annual estimates of the liabilities of the State’s group health insurance program and approval of contract renewals promulgated by the Department of Central Management Services;
• Implement the provisions of the State Facility Closure Act;
• Annual estimates of public pension funding requirements and preparation of pension impact notes.
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CGFA Commission Members
Senate
Senator Jeffrey M. SchoenbergCo-Chair
Senator Michael FrerichsSenator Matt MurphySenator Suzi Schmidt
Senator Dave SyversonSenator Donne Trotter
Dan R. LongExecutive Director
Jim MuschinskeRevenue Manager
Dan HankiewiczPension Manager
House of Representatives
Representative Patricia R. Bellock
Co-Chair
Representative Kevin McCarthy
Representative Elaine NekritzRepresentative Raymond Poe
Representative Al RileyRepresentative Mike Tryon
Trevor J. ClatfelterDeputy Director
Edward H. Boss, Jr.Chief Economist
http://www.ilga.gov/commission/cgfa2006/home.aspx
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Current Financial Condition of the State-funded Retirement Systems
Summary of Financial Condition
State Retirement Systems Combined
Assets at Market Value / Without Asset Smoothing
FY 2011
($ in Millions)
Accrued Net Unfunded Funded
System Liability Assets Liability Ratio
TRS $81,299.7 $37,471.3 $43,828.4 46.1%
SERS $31,395.0 $10,970.8 $20,424.2 34.9%
SURS $31,514.3 $14,274.0 $17,240.3 45.3%
JRS $1,952.5 $606.0 $1,346.5 31.0%
GARS $298.4 $60.4 $238.0 20.2%
TOTAL $146,459.9 $63,382.5 $83,077.4 43.3%
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Historical Unfunded Liability
FY 2011 Investment Returns
TRS 23.4%
SURS 23.8%
ISBI* 21.7%
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* The IL State Board of Investments has investment authority for SERS, GARS, and JRS
Factors Causing the Growth in Unfunded Liability
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State-by-State Comparison of Funding Ratios
Source: Standard & Poor’s Global Credit Portal, U.S. States’ Pension Funded Ratios Drift Downward. (March 31, 2011)
State-by-State Comparison of Unfunded Liability
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Source: Standard & Poor’s Global Credit Portal, U.S. States’ Pension Funded Ratios Drift Downward. (March 31, 2011)
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SB 1946 – Cullerton (Madigan)Passed House: 92-17-7Passed Senate: 48-6-3
Systems Impacted• IMRF, Chicago Municipal, Cook County, Cook County Forest Preserve, Chicago Laborers, Chicago
Park District, Metropolitan Water, SERS, SURS, TRS, Chicago Teachers (Judges and GA separate; CTA, Police and Fire excluded)
Retirement Eligibility – Except State Policemen, Firefighters, and Correctional Guards• Normal Retirement – 67 years old with 10 years of service
• Early Retirement – 62 years old with 10 years of service with a 6.0% per year reduction in benefit for each year age is under 67
• Annuity based on highest 8 years out of last 10 years of service
• Annual final average salary may not exceed $106,800, as automatically increased by lesser of 3% or one-half of the annual increase in the CPI-U during the preceding 12-month calendar year
Retirement Eligibility – State Policemen, Firefighters, and Correctional Guards
• Normal Retirement – 60 years old with 20 years of service
• State Policemen, Firefighters, DOC guards still eligible for Alternative Formula
Annual Increases in Annuity• Increases begin at the later of the first anniversary of retirement or age 67
• Increases equal to the lesser of 3% or one-half the annual increase in the CPI-U during the preceding 12-month calendar year; if increase in CPI is zero or if there is a decrease in CPI, then no COLA payable
• Increase not compounded
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STATE FUNDED RETIREMENT SYSTEMS
Public Act 96-0889 (SB 1946) significantly lowers the required employer contribution for each of the five State retirement systems. The Commission’s actuary performed a cost analysis based on this reduction in contributions for members of each State retirement system in Illinois who start participation on or after January 1, 2011. The results of this cost analysis and the impact the reduction in contributions will have on the State can be seen in the following table.
Projections of Reduction in State Contributions Based on P.A. 96-0889 (SB 1946)
Projected State Pension Contributions
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Final Thoughts
Artemus WARD 1834-1867
“Let us all be happy, and live within our means, even if we have to borrow the money to do it with.”