The Illinois Teachers Retirement System could vote at this week’s board meeting to lower its assumed rate of return – an action that spurred a panicked memo from Gov. Rauner’s office.
The discount rate, currently at 7.5 percent, could stand to be lowered to a more realistic number. But Rauner’s office doesn’t want to deal with the higher contributions that would result from the decision.
A Monday memo from a top Rauner aide said the Teachers’ Retirement System (TRS) board could decide at its meeting this week to lower the assumed investment return rate, a move that would automatically boost Illinois’ annual pension payment.
“If the (TRS) board were to approve a lower assumed rate of return taxpayers will be automatically and immediately on the hook for potentially hundreds of millions of dollars in higher taxes or reduced services,” Michael Mahoney, Rauner’s senior advisor for revenue and pensions, wrote to the governor’s chief of staff, Richard Goldberg.
When TRS lowered the investment return rate to 7.5 percent from 8 percent in 2014 the state’s pension payment increased by more than $200 million, according to the memo.
Mahoney cautioned that “unforeseen and unknown automatic cost increases would have a devastating impact” on Illinois’ ability to fund social services and education.
One of Rauner’s top Republican legislative allies, Senate Minority Leader Christine Radogno, urged the TRS board to delay a vote Friday to give the public time to weigh in on its possible actions.
“This issue is important enough at the very least to put the TRS board on notice we don’t want them taking any action that could cost taxpayers $200 to $300 million without appropriate scrutiny,” she said.