Pension liability woes overstated

The size of unfunded liabilities that state Rep. Darlene Senger refers to in her recent letter does not give a full view of the state's pension fund. Unfunded liabilities are amortized over 40 years in Illinois, using a “riskless rate” to calculate fund liabilities does not reflect the amount that the state and local governments need to deposit in their pension funds.

Moreover, as markets and economy improve, so do the assets in the pension funds. “Since June 30, 2009, a date in which many recent studies on the financial condition of state pension trusts are based, investment returns have rebounded sharply — nearly 25 percent higher since then,” according to the National Association of State Retirement Administrators, which also noted “state and local government pensions are not paid from general operating revenues but, rather, from trusts to which retirees and their employers contributed.” Legislators who claim that the pension system is “unsustainable” most likely use outdated information, “particularly at the low-point of the market recovery (June 2009).”

If we look at the Teachers' Retirement System, for instance, the numbers to focus on are the amounts TRS pays out in pensions and benefits in a year. During the last fiscal year, TRS paid out $3.9 billion in benefits, but collected $6.8 billion in revenue, more than enough to meet current obligations, according to the Illinois Education Association. Furthermore, the total value of TRS assets continues to improve. At the end of fiscal 2009, the TRS fund held $28.5 billion. At the end of fiscal 2010, the TRS fund held $31.3 billion. It currently holds $37.3 billion. That's a 23.6 percent increase in less than two years.

While the media frets about the unfunded liability, the total amount is never due all at once.

Glen Brown

Naperville