The Dow Jones Industrial Average fell almost 500 points today, after dropping more than 300 points yesterday.
Some Illinoisans may think they aren’t in the stock market because they don’t own stocks or mutual funds. They may have another think coming.
That’s because Illinois state and local governments provide retirees with defined pension benefits guaranteed under current law.
How does that put non-stock-owning taxpayers in the stock market?
Those plans are woefully underfunded, but they still have significant investment portfolios. For example, the Teachers Retirement System of Illinois reported a liability of $127 billion in its latest annual financial report, backed by $52 billion in invested assets. Stocks form a big chunk of those invested assets.
That chunk can get bigger, and it can get smaller – like it did yesterday and today.
Why should taxpayers care? They are effectively in the market. Under current law, taxpayers have to make up for any shortfall in the investment portfolio below the defined pension benefits protected by law.
Have a nice day.