Once again Illinois General Assembly members profited by pandering to their constituents, ignoring the state pension plan debacle and getting re-elected.
Now the truth comes out. The Wall Street Journal recently reported Illinois' abysmal pension investments earnings. In fiscal 2012, the Teachers' Retirement System had a 0.76-percent return and the State Employees Retirement System earned a measly 0.05 percent. Worse yet, the General Assembly Retirement System had a negative 0.14-percent return. The pension plans assume investments would yield an 8-percent return to help fund defined benefit pension obligations.
The state estimates unfunded pensions at $95 billion based on the 8-percent assumption. Any shortfalls eventually have to be made up with larger contributions from taxpayers, or unions and participants need to agree to contribute considerably more. Participants should also be demanding pension boards and fund managers be accountable for their investment incompetency.
Like the foolish assumption of an 8-percent return rather than a more realistic 4- to 5-percent return, some voters and plan participants apparently are assuming the politicians will finally get around to making some structural changes like converting to a define-contribution plan. However, there is no evidence the Democratically-controlled legislature will turn their back on their union buddies.
If the General Assembly during the lame duck session chooses to continue to abdicate their fiduciary role to maintain financially viable state pension plans, the plans could become "unfixable" and insolvent. Some participants and politicians may be so delusional as to think the feds will bail out Illinois. While marijuana is illegal in Illinois, you have to ask yourself what are they smoking in Springfield?
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