The First Consequence of Illinois’ Pension Put-Off

Last week, Illinois announced that it was putting its required $560 million pension payment for November on hold; December’s payment is also in jeopardy.

Benefits will still be paid, but there are still consequences for the delay. This week, the state’s Employees Retirement System requested from its investment board the two largest cash withdrawals in the system’s history, totaling $225 million.

In absence of the states monthly payment, SERS needs that money to pay out benefits. It also means that the $225 million isn’t being put to work in the market.

More from Bloomberg:

The State Employees’ Retirement System on Wednesday asked the Illinois State Board of Investment for $100 million on Nov. 10, and another $125 million on Dec. 10 to pay for retiree benefits in the next two months, according to Tim Blair, the system’s executive secretary. The request for cash from the investment board is the largest in the system’s history.

The call comes one week after Comptroller Leslie Geissler Munger said Illinois’s $560 million November payment to its retirement funds would be delayed, and its December payment could also be postponed as the budget stalemate approaches a fifth month.

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Republican Governor Bruce Rauner and the Democrat-controlled legislature have failed to agree on a spending plan for the year that started July 1, leading to a cash shortage. Retiree benefits will continue to get paid, leaving the burden on the retirement systems to cover those bills without a deposit from the state in November and possibly December.

“Due to the uncertainty with the state budget, this drawdown will allow the November and December benefits to be paid, regardless of the status of the normal cash flow situation,” according to a copy of the letter dated Oct. 21 from the State Employees’ Retirement System to the investment board.

While the fund has requested transfers in the past, it has never had withdrawals of more than $100 million, said Blair, who is based in Springfield, the state capital.

The collective funding ratio of Illinois’ pension systems is about 39 percent, the worst in the country, due in no small part to skipped contributions from the state.