CHICAGO — The Illinois Teachers' Retirement System's total unfunded pension obligations worsened slightly in the last fiscal year.
TRS' unfunded liabilities increased to $62.7 billion from $61.5 billion, according to its annual actuarial valuation report from actuary Buck Consultants of Chicago.
TRS is the largest of the state's five retirement funds, accounting for more than half of the state's collective fiscal 2014 tab of $111 billion of unfunded pension obligations. The burden has contributed heavily to the state's credit deterioration in recent years that has dragged its general obligation rating down to the lowest among states.
"The bottom line is TRS still has less than 50 cents on hand for every dollar that is owed to our members, including members that already are retired," TRS executive director Dick Ingram said in a statement Friday. "That cannot continue…we cannot invest the system out of a problem created by decades of underfunding by state government. There needs to be a stronger commitment by the state to fully pay the promises made to our members over the last 76 years."
TRS did see its funded ratio rise to 42% from 40.6% in fiscal 2015, based on the actuarial smoothing of the funds over a five-year period. That's the figure that is formally reported and used to calculate the state's contribution for the next year.
On a market value basis, however, which looks only at the results of the previous year, the funding level actually deteriorated to 42.9% from 44.2%.
The TRS board pegged its fiscal 2017 state contribution request at $3.98 billion, up 6.5 % from its fiscal 2016 request. The figure is based on a state calculation formula and does not represent an ARC level.
TRS said evolving actuarial standards indicate the state's annual contribution to TRS should be $6.07 billion. The system said it serves 400,000 members and had assets of $45.9 billion as of June 30, 2015. It previously reported an earnings fiscal 2015 earnings rate of 4.6% on its investments.
Illinois sought to trim its unfunded liabilities and annual contributions with reforms that raised employee contributions and cut benefits, but the Illinois Supreme Court voided the changes as unconstitutional in May. The constitution's pension clause affords benefits sweeping protections against being impaired or diminished and the court's ruling limits the state's options going forward.
Pension reform has taken a backseat amid the ongoing stalemate between Republican Gov. Bruce Rauner and the General Assembly's Democratic majorities over a 2016 budget, which remains in limbo four months into the fiscal year. The state comptroller last month announced the November pension contribution would be delayed as the state grapples with a cash flow crisis without a balanced budget in place, although retirees will still receive their annuities.
Both Fitch Ratings and Moody's Investors Service downgraded Illinois in November, to BBB-plus and Baa1. Standard & Poor's rates the state A-minus, and has the credit on watch for negative implications.
