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Audit: Unfunded Pension Liability Grew Nearly $12 Billion
The unfunded liability in the state's retirement systems has ballooned by nearly $12 billion in the last budget year. That's according to a report released this week from the Office of the Auditor General.
The number represents an increase of more than 14% in the last budget year. It shows the gap between what the state owes for employee retirement benefits, and what it actually has the money set aside to pay for, is widening.
"There's cause for concern," said Kristina Rasmussen, executive vice president of the nonprofit Illinois Policy Institute.
The unfunded liability for the state's retirement systems is growing. In a yearly review, the Office of the Auditor General studied the funding from halfway through 2011 to June 30, 2012. The agency discovered nearly $95 billion in unfunded liability. That means current assets in the five systems cover only 40% of what the state owes in retirement benefits to its employees.
"The basic problem comes from the fact that since 1939, the General Assembly has never given us a full amount of money that our actuaries say is needed to fully fund it," said Dave Urbanek, spokesman for the Teachers' Retirement System.
TRS has the highest funded ratio of the five state pension funds, at about 42%. The lowest funded is the General Assembly System, with 18.5%.
"There is always concern among our members, but it's a long term concern, because we anticipate if things don't change in Illinois, problems will begin in about 20 years," Urbanek said. "We have enough money on hand to pay pensions for about 20 years. It's after that point, when people who are still teaching are ready to retire, that the underfunding will become a critical issue."
The audit also finds three of the five systems out of compliance for leaving an internal auditor position vacant for six months. As a result, only one of the eight internal audits for the year were completed in the State Employees, Judges and General Assembly retirement systems.
"One out of 8?" Rasmussen questioned. "That means a lot could go unnoticed. Their job is to catch fraud, and when you don't have that watchdog in place, a lot could happen."
System officials say they weren't able to fill the job as quickly as they wanted, because they couldn't find the right candidate.
The audit shows all five of the state's pension systems took a hit on investments during the last budget year.
The spokesman for TRS points out those numbers can change dramatically from month to month based on the economy.
The Illinois Policy Institute points out the 40% funded ratio is estimated on generous expectations for investments. The gap between what the state owes and has the money to pay for, could be greater.
Under a law enacted in June, the board of each retirement system is required to submit an amount for the state to contribute each year to the Governor and General Assembly.