Education

Illinois teachers’ pension system faces $71.4 billion unfunded liability

Why does the Illinois teachers' pension system have a deficit?

Dick Ingram, the executive director of the Teachers' Retirement System, explains why he thinks the pension system faces a $71.4 billion unfunded liability. Ingram spoke to metro-east teachers and the general public during a town hall-style meeting
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Dick Ingram, the executive director of the Teachers' Retirement System, explains why he thinks the pension system faces a $71.4 billion unfunded liability. Ingram spoke to metro-east teachers and the general public during a town hall-style meeting

The pension system for Illinois teachers faces several challenges at the moment, including an unfunded liability of $71.4 billion.

“What that means for those of you who are retired, right now today, we have roughly 50 cents on the dollar for what we need to pay your benefits going forward,” said Dick Ingram, the executive director of the Teachers’ Retirement System.

The average pension for a metro-east teacher is $54,812, according to Ingram. He said the pension system is using what it earns from investments to sustain those benefits.

“... We’ve never missed a benefit check, and we don’t plan to in the future,” he said.

For teachers, administrators and other public school personnel who are still contributing to the Teachers’ Retirement System, Ingram said it can only offer them what they’ve contributed.

He said the system receives money from the state despite the budget impasse. Its funding shortfalls were instead caused by pension legislation that created “a permanent 10 percent deficit,” according to Ingram.

“... A 15-year plan that started in 1995, over 15 years gradually increased (contributions) to a level that was designed to fund us to 90 percent over 50 years,” he said.

The long-term effect of that, according to Ingram, is that every dollar the state didn’t contribute will cost it $3 in the future, like the interest that accrues on a credit card. Of the $4 billion that the state is expected to contribute this fiscal year, Ingram said only $836 million is the cost of the pensions.

If they keep having these issues, we’re not gonna get teachers in Illinois.

Kathleen Keiser, former East St. Louis teacher

And taxpayers fill in the gaps left by state funding, Ingram said.

“We get contributions in, and we invest them to pay (teachers’) benefits. If we don’t have the contributions, we can’t invest them, so taxpayers — you and your neighbors — have to make up the fact that we didn’t have that money to invest,” he said. “That’s why pensions are so expensive right now.”

Kathleen Keiser, who used to teach in East St. Louis, said she’s worried about future teachers.

“If they keep having these issues, we’re not gonna get teachers in Illinois,” she said. “We need young teachers in Illinois.”

Ingram said there’s no “magic bullet” solution.

“The real issue is it’s taken 70 years (since the pension system was created) to get to this point. It’s gonna take a long time to get out,” he said.

We’ve never missed a benefit check, and we don’t plan to in the future.

Dick Ingram, Teachers’ Retirement System executive director

Karen Keuss, who is retired from teaching at Whiteside Elementary School, said she’s worried about the teachers who haven’t yet made it to retirement age.

“There’s a lot of issues out there for our friends who are actively teaching — issues of great concern,” she said.

One of those issues is proposed legislation that Ingram said would likely be challenged in court if it passed because of concerns that it is unconstitutional.

Ingram said the bill would reduce pension benefits for active teachers who started working before Jan. 1, 2011 — tier I members. They can choose to keep a 3 percent cost of living adjustment — an automatic annual increase that compounds over time — but any raises they receive would not factor into their pensions, according to Ingram.

A second option is to trade their 3 percent adjustment for an adjustment that is half the rate of inflation, he said. Teachers would also receive a one-time payment equal to 10 percent of their total contributions paid to the pension system, and their future payroll contributions would also be reduced from 9 percent to 8.5 percent, Ingram said.

“The folks that have designed this, thought this up,” Ingram said, “are absolutely confident that it’s constitutional because they have a choice.” But he said some lawyers have argued that it’s unconstitutional to ask teachers to give up something they were previously guaranteed as part of their pensions.

There’s a lot of issues out there for our friends who are actively teaching — issues of great concern.

Karen Keuss, retired Whiteside Elementary School teacher

Another issue that Ingram believes will be litigated in the future is related to what teachers are asked to contribute to the pension system.

Teachers who started working after Jan. 1, 2011 — tier II members — receive benefits that cost 7 percent of their salary, but contribute 9 percent, according to Ingram.

“... A tier II member who’s paying the same 9 percent as a tier I member is fully paying for their defined benefit pension, and they’re helping the state pay off the unfunded liability for tier I,” Ingram said. “Over the next 20 years or so, that amounts to a $20 billion subsidy that tier II members are paying that really the state should be paying.

“The legal question is,” he added, “is that extra two percent that tier II members pay, is it really, in effect, a tax that nobody else pays in the state?”

Ingram said the tier II benefit is “not as sound for retirement” as the tier I benefit, which was designed to give a teacher of 35 years a pension that is 75 percent of his or her final salary.

“The tier I benefit met that goal. The tier II benefit does not, and we’re in the process of waking our tier II members up to that fact,” he said. The Teachers’ Retirement System is starting a campaign to educate those teachers about planning for their retirements early, according to Ingram.

“They really do have to plan harder,” he said.

Lexi Cortes: 618-239-2528, @lexicortes

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