Illinois Teachers’ Fund Returns 17 Percent; Unfunded Liabilities Still Growing


The Illinois Teachers’ Retirement System announced over the weekend its investments had returned over 17 percent in fiscal year 2013-14.

As a result, the system’s funding ratio improved – climbing from 42.5 percent to 44.2 percent.

But unfunded liabilities grew, as well.

From Reuters:

The funded ratio for Illinois’ biggest public worker pension fund improved slightly in fiscal 2014 due to strong investment returns, but the system still ranks among the worst funded major retirement systems, the Teachers’ Retirement System (TRS) said on Friday.

The system for teachers and other school workers outside of the Chicago Public Schools reported that its funded ratio rose to 44.2 percent in the fiscal year that ended June 30 from 42.5 percent. While that marked the first improvement since fiscal 2006, the funded ratio remains far below the 80 percent level considered healthy.

“An improved funded ratio is always good news, but it doesn’t mean by any means that the financial problems at TRS have been solved. We cannot invest our way out of this problem,” TRS Executive Director Dick Ingram said in a statement.

The retirement system said its investment rate of return was 17.4 percent, net of fees. But its unfunded liability grew by 10.51 percent from $55.73 billion at the end of fiscal 2013 to $61.59 billion.

“TRS members still face a fiscal day of reckoning in the future unless a dramatic improvement is seen over time in the funded status,” Ingram said.

TRS manages $45.3 billion in assets for its nearly 400,000 members.

Providence Pension Funding Could Be Worse Than Advertised

Providence Pension Funding, Analysis of Michael G. Riley
Analysis by Michael G. Riley

Sometimes, a pension plan’s official funded ratio can be deceptive. That’s because there are many different assumptions that play into that final number, including the fund’s assumed rate of return.

Michael G. Riley, vice chair at Rhode Island Center for Freedom and Prosperity, has done some number-crunching to see what Providence’s pension funding would look like if the city lowered it’s return assumption, which currently stands at 8.25 percent.

The results of the analysis can be seen in the table above. Riley’s methodology can be read below. From Go Local Prov:

I have calculated the TRUE pension liability given certain relevant assumptions. Let me first say that if Bondholders did not currently have first lien on Tax revenues, due to a 2011 law passed by the assembly placing public workers and taxpayers at the end of the line, then Providence, Rhode Island would already be rated “junk” by Moody’s, S&P etc. and would have very little flexibility to finance anything.

Mayor Taveras uses among the highest discount rate in the country 8.25%. Moody’s will use and analyze using between 5.5% and 6%. We will use 6% for their analysis and a blended rate based on crossover points indicating 70% muni rate and 30% the providence assumption for returns. The 2012 CAFR is used and assets were then reported as $421 million dollars ( even though assets in the fund were only $247 million) First we will adjust assets down by $57 million based on the auditors admonition against Taveras accounting gimmick, next we will use market value as prescribed by gasb 67.

This table reveals the truth through analysis, if you want to believe Taveras lies then keep reading the Projo and WPRI. If you are an accountant or actuary including those employed by Providence please refute these numbers in public.

According to NASRA research, the average pension fund in 2013 assumed a rate of return of 7.72 percent.

NASRA used a sample of 126 public pension plans. Only four plans had return assumptions higher than 8 percent.