Team 1 Presentation
Team 1 suggested using a realistic rate of return: 3.3% instead of 7.5% on pension investments. They also promoted the idea of a rainy day fund that would be created out of excess revenue from investments above the 3.3% return. Their final suggestion was to index liabilities to the assets, in effect unfixing the liabilities.
Team 2 suggested consolidating all state pension funds into one large fund. Based on their projections, it would save money through management fees, and would total savings of $2.6 billion. They also suggested modifying actuarial practices and using realistic assumptions for returns on investments. The team also proposed changes to auditing practices to account for discrepancies in reporting and proper asset allocation. They also presented an idea to reallocate the budget in more effective ways. Their final suggestion was the creation of a federal grant think tank. Their ideas encompassed a wide and diverse variety so that if one aspect failed, they would still have some sort of improvement in the pension crisis.
Team 3 focused on debt management, generating income, alleviating public outcry, and preventing the disaster. For debt management, they believed unreasonable expected returns on investment needs to be changed; the state needs prioritize its budget and reduce expenses; and engage in responsible investment activity. To generate income, the team suggested expanding the scope of medical marijuana in the state. And finally they suggested that in order to prevent future disasters, they promoted the idea of emphasizing ethics, regular supervision of pension contributions, and transparency in pension funds.
Team 4 suggested that the current assumption for return on assets should be improved, and said that we need to change the way we think about ROA assumptions. They also wanted to evaluate systemic risk inherent in liquidation of major state assets. Next, they suggested that both employers and employees need to be accountable for the pension crisis, and presented an employer and employee contribution schedule for payments. They also suggested the following actions are put in place to improve the state of current affairs: increase taxes, cut spending, move new workers to a defined contribution plan, cut benefits, and raise contributions. They also proposed a new amendment that would implement a progressive tax 2-7% that will increase revenues, redefine the pension benefit clause, and create term limits for Illinois state representatives. This amendment also included the provisions for a bankruptcy clause for Illinois.
Team 5 proposed lowering the benefits and reducing the COLA and the annuity amount given to each employee. They suggested that in order to succeed, the state needs a solution across multiple fields: politics, legal, accounting, actuarial assumptions. Their solution broke employees into three groups: new hires, current employees, and retired employees. For each they suggested a change to assist with the pension crisis. For new hires, they suggested a defined contribution 401(k) plan. For current employees, they suggested a service tax. Finally for retired employees, they suggested the implementation of a retirement tax or lump sum payments.