Several months ago, the SJ-R published a letter to the editor I submitted regarding the deepening crisis with state funded pensions in Illinois.
A week later the paper published a reply from Dave Urbanek, spokesman for the Teachers Retirement System (TRS), one of the larger components of our decrepit pension systems. Though well written, I thought the points raised were irrelevant; but I was flattered that I rated a response, and the figures cited piqued my interest enough to check out TRS’s website, which has a wealth of information available. The fiscal reports supported his statements without refuting mine.
I checked back last week to peruse the TRS Comprehensive Annual Financial Report. Reading the financial summary, either side could claim vindication. I suspect Urbanek would point to the 13.5% (gross of fees) return on the TRS portfolio for 2010 and its balance increase of $2.5 billion. However, those numbers are after $6.8 billion in contributions and investment income. As liabilities increased from $73.0 to 77.3 billion, the reported funds available slipped to 48.4% of the actuarial requirement.
To understand the chilling part, however, you have to read between the lines. Beginning in 2009, with massive losses in the pension funds, Public Act 96-0043 was passed, requiring pension fund values to be “smoothed” over five years. Coincidentally, this then understated those massive losses. How understated? From the actuarial section:
“As of the June 30, 2010 valuation the total net deferral is a $6,115,308,000 loss”
So “actuarial” now means “pretend.” While TRS reported $37.4 billion in “actuarial” assets, market value was $31.3 billion. Using these real numbers, TRS funding has dropped from an abysmal 56% in 2008 (as the the market was crashing), to 40% — despite above average 2010 returns.
It’s not looking good, but at least we’ll know what to tell pensioners when this train wreck arrives:
“You got smoothed!”