In his budget address, Governor JB Pritzker suggested that people who questioned his plan and statements are carnival barkers. If that is true then carnival barkers include basic mathematicians, the state’s pension systems’ actuaries, SEC officials and those who drafted the state’s latest bond offering.
The governor said that carnival barkers will say that the budget surplus would not exist without money from the federal government and he claimed that this year the state would end in a $1.7 billion surplus. Basic math would say that if the state did not receive the approximate $8 billion from the Coronavirus State Fiscal Recovery Fund, then to balance the budget or end with a $1.7 billion surplus the Governor would have had to raise upwards of $8 billion through taxes, by cutting services or benefits or borrowing money.
The governor mentioned his budget will be making the required contributions to the state’s pension plan. The reality of this statement depends on the definition of “required.” The state’s latest bond offering stated, “The State’s contributions to the Retirement Systems, while in conformity with State law, have been less than the contributions necessary to fully fund the Retirement Systems as calculated by the actuaries of the Retirement system.” If this budget is like his previous budget, the Governor will only contribute the statutorily “required,” not what the pension system’s actuaries believe are required to fully fund the systems. In 2013 the SEC charged Illinois with securities fraud for misleading municipal bond investors. At that time SEC officials stated, “The statutory plan structurally underfunded the state’s pension obligations and back loaded the majority of pension contributions far into the future.”
Governor Pritzker stated that his budget would contribute an additional $500 million to the pension plans. If true, this is a good thing. But the Teachers’ Retirement System’s (TRS’s) actuaries reported that the Governor’s 2021 and 2022 budget shorted the pension plan by more than $3 billion. If all of the additional $500 million was contributed to TRS then the plan’s annual underfunding would only be $2.5 billion.
In his address Pritzker stated that the pension assets are up and pension liabilities are down. The pension systems’ actuaries would agree with half this statement. According to the pension systems’ 2021 financial reports, due to extraordinary investment returns, pension assets did increase. But liabilities did not go down. They increased: TRS by $3.7 billion and the State Employees’ Retirement System by $2.9 billion.