Officials with the Teacher’s Retirement System made a decision today that could add another $421 million to Illinois’ annual pension costs.
The board voted to accept the recommendation of state actuaries to lower the expected rate of return on investments by half a percent. That move would, in turn, increase the amount of money the state is required to pay into the fund.
Dick Ingram, the board’s executive director, warned that the rate could go even lower.
"If you ask me my personal opinion right now, what I would expect, what I would vote for and what I would work for, would be another reduction in the springtime, the next time around.”
Gov. Bruce Rauner had wanted the board to delay the vote. He filled three vacancies on the board with appointments this morning, but one appointee was ineligible. The other two -- Anne Marie Splitstone and Laura Pearl -- abstained from every vote the board took today.
After more than an hour of listening to actuaries explain why the teacher pension fund isn’t earning as much off its investments as it used to, TRS board member Andrew Hirshman tried explaining it using medical terms instead of math. He compared the pension plan to a patient who hears from three doctors (or financial advisors) to cut back on the number of cigarettes — or in pension terms, reduce the expected rate of return by at least a half a percentage point.
“We all know here the plan isn’t in perfect health. So in my mind, I view you as a doctor,” he said, gesturing to the panel of actuaries. “So with this inflation issue, I hear one doctor saying this is what’s going to happen and this is what needs to happen. I hear our investment advisors saying the same thing. I hear staff saying the same thing. I’m feeling if I have a patient I really care about, and I’ve taken them to three doctors and they’re all saying the same thing, that holds a lot of weight.
"And on top of that,” Hirshman said, “the state actuary is saying, ‘Please make these changes.’ So now it’s like the Surgeon General. It’s like -- at some point, smoking is dangerous for your health!” His summation of the grim scenario got a hearty laugh from the TRS board.
It’s possible that the General Assembly will find some way to override the board’s recommendation. As Ingram said earlier in today’s meeting, “Political science has always trumped actuarial science in Illinois.”