The state of Illinois cannot be competitive long term when it is racking up $9 billion interest per year on the unfunded liability on the state pensions (TRS, SERS, SURS, GARS, JRS).

$9 billion per year is $24,657,534 per day.

The value taxpayers receive in exchange for $9B per year is zero.

For fully funded pensions, there is no unfunded liability, and thus no interest on the unfunded liability.

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The $9,100,000,000 interest was calculated from the unfunded liability of the 5 state pensions $129,817,900,000 as of the end of fiscal year 2016 (FY 2016), which was June 30, 2016.

That is 7% interest.

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The unfunded liability was calculated based on assets at market value without asset smoothing.

Using assets at actuarial value and asset smoothing, the unfunded liability was $126,503,600,000.

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The investment rate of return (discount rate) used by the pensions for FY 2016 follow:

TRS – 7.00%

SERS – 7.00%

SURS – 7.25%

JRS – 6.75%

GARS – 6.75%

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Source document:

Illinois Policy Institute

Interest on Illinois’ Pension Debt is $9.1B Per Year

by Michael Lucci

March 6, 2017

http://www.illinoispolicy.org/interest-on-illinois-pension-debt-is-9-1b-per-year

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That document in turn references the following document:

Illinois General Assembly

Commission on Government Forecasting and Accountability (COGFA)

Special Pension Briefing: State Retirement Systems Overview

November 2016

by Julie Bae and Jerry Lazzara, Pension Analysts

On the Commission at that in the 99th General Assembly time were:

State Senate:

– Donne Trotter, Co-Chair

– Pamela Althoff

– David Koehler

– Chapin Rose

– Heather Steans

– Dave Syverson

———

State House:

– Donald Moffitt, Co-Chair

– Kelly Burke

– C D Davidsmeyer

– Elaine Nekritz

– Al Riley

– Michael Nunes

————–

Executive Director – Dan R Long

Deputy Director – Laurie L Leby

Pension Manager – Dan Hankiewicz

cgfa.ilga.gov > Topics > Pension Reports > Special Reports / Miscellaneous > November 2016 Special Pension Briefing

The credit rating for Illinois is not junk rated.

It is currently one step above Junk.

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On Sunday June 25, 2017, there was testimony at a Committee of the Whole meeting in the State House of Representatives regarding public sector Pensions.

There are YouTube videos of two of the testimonies.

The following five people provided testimony.

They appear from left rot right in one of the videos:

Lee Ann Gemmingen:

– IFT Executive Board Vice President;

– Southwestern Illinois Federation of Teachers, IFT Local 6600 President;

– Teacher in Belleville School District 118.

————-

Elaine Ferguson:

– President of the West Central IEA Retired Chapter in Rushville, IL

– Retired in 2005 as a teacher from Nauvoo – Colusa CUSD 325.

– Participant in the 2014 pension reform lawsuit, Harrison v Pat Quinn.

—————-

John Stevens:

– Chief Counsel of We are One, which is a coalition of labor unions against cuts to public sector pensions.

– Partner at Freeborn and Peters in Springfield.

——————

Dan Montgomery – President, Illinois Federation of Teachers (IFT)

Ted Dabrowski – VP of Policy, Illinois Policy Institute

——————-

IEA = Illinois Education Association, a statewide teachers union.

IFT is also a statewide teachers union.

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YouTube

Illinois Policy Institute Channel

Ted Dabrowski Addresses the Illinois House on Pensions

published on June 25, 2017

http://www.youtube.com/watch?v=1EEtm0l39vI

The text of the testimony of the retired teacher is found here:

IEA-NEA Regional 12

Rushville, IL

Region 12 – Standing Up For Educators

June 27, 2017

https://iearushville.wordpress.com/2017/06/27/region-12-standing-up-for-educators

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IEA = Illinois Education Association (statewide teacher union affiliate of the NEA)

NEA = National Education Association (national teacher union)

Teachers in Illinois are required to provide dues or fees to the local affiliate, statewide affiliate, and national union.

Rain Man, Save Us All!!

LLavona (L) & Stand4Truth on their recent vacation together on Mykonos Island 4/2017:

http://cdn.shopify.com/s/files/1/1154/7998/articles/2_kooks_Catch_Surf_clothing_1024x1024.png?v=1463614785

Typo in the 07/01/2017 at 12:44 pm comment.

The last name on the list of State House COGFA members should be Michael Unes.

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Here’s a two year update on the section of that comment which estimates the daily and annual pension interest on the 5 state pension funds (TRS, SERS, SURS, JRS & GARS).

The source of information is the Illinois General Assembly’s (ILGA) Commission on Government Forecasting & Accountability (COGFA) Monthly Briefing from November 2018 titled the Special Pension Briefing.

cgfa.ilga.gov/Upload/1118%20SPECIAL%20PENSION%20BRIEFING.pdf

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Using the actuarial (smoothed) value of assets, the total unfunded liabilities of the State systems totaled $133.7 billion on June 30, 2018.

Based upon the market value of assets, the combined unfunded liabilities of the State systems totaled $133.5 billion on June 30, 2018.

Let’s round it down to $133 billion to lowball the estimated interest.

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The investment return assumptions for fiscal year 2018 (FY 2018) were:

TRS: 7%

SERS: 7%

SURS: 6.75%

JRS: 6.75%

GARS: 6.75%.

Let’s use 6.75% (to lowball the estimated annual interest).

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$133,000,000,000 x .0675 = $8,977,500,000 estimated lowball interest for one year on the unfunded liability.

Let’s round up to $9 billion.

Meaning taxpayers racked up an estimated $9B for one year of unfunded liability pension interest.

That $9B is just an estimate.

What really happens is annually an actuary recalculates the unfunded liability and the interest is spread over the amortization (pay back) period.

The cycle repeats annually.

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Let’s estimate the daily interest

$9B annual interest / 365 days per year = $24,657,524.

Taxpayers rack up an estimated $24.6 million dollars per day in interest on the unfunded liability for the 5 state pension systems.

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What happens if 7% interest is used?

$133,000,000,000 x .07 = $9,310,000,000.

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This is a major reason the State of Illinois is in a perpetual budget crisis.

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Reading the pension briefing one comes across the big lie perpetuated by the Illinois General Assembly.

The Big Lie is the problem is due to a lack of employer contributions.

Why is that a lie?

Because the employer contributions are the result of benefit levels and salaries.

And pension have always been underfunded.

Yet rather than fully funding pensions, then hiking benefits and salaries, the State has forever done the opposite.

This is roughly equivalent to charging more items to your credit card every month, even though you can’t pay the monthly balance in full, then blaming the problem on the fact you don’t make the full monthly payment.

COGFA does not properly account for this past benefit hiking and salary hiking history in their chart depicting the change in the unfunded liability.

The change COGFA depicts leaves the reader with the wrong impression, with no good explanation of the history outlined above.

Just another government accounting and financial game.

It’s like giving a credit card to your kid, who charges beyond the agreed upon budget, then blaming the problem on you not making the full monthly payment.

But it goes beyond that with lowball legislative projections when legislative benefit hikes are passed, and much, much more.

There are many assumptions used by an actuary when calculating unfunded liabilities.

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Of course the public sector workers want the highest possible:

– current salary

– current benefits

– pension

– retiree healthcare.

One way to do that in the short term is to hike current salary, current benefits, and retiree healthcare benefits, while putting less to pensions.

That’s the game that was played since the beginning of the state pension funds.

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The problem is that’s not sustainable and by definition is a ponzi scheme.

Fully funded pensions can support themselves, if actuarial projections are met.

Underfunded pensions cannot support themselves, but need new taxpayer money.