By Ed Mendel
Monday, December 10, 2012

Illinois state pension systems are the worst-funded in the nation — called a “crisis” by the governor, “unfixable” by a Chicago business group — and they share a problem with CalSTRS: years of deliberate underfunding.

A website unveiled by Illinois Gov. Pat Quinn last month, featuring a cartoon “Squeezy the pension python” crushing the Capitol, says state pension costs tripled in five years and are projected to exceed state spending on K-12 schools by 2016.

A video on the website by Salman Khan, an online educator, explains that growing pension costs are squeezing the money available for schools, public safety and health care.

Like other pension funds, the five Illinois state pension funds were hit by big investment losses during the decade. But what sets Illinois apart, with a funding level that fell to 38 percent, is the failure to make actuarially required contributions.

“The funding crisis is the result of the deliberate underfunding of pensions year after year, a practice as old as the pension funds themselves, dating back to the creation of the first pension fund: the Teachers’ Retirement System in 1939,” says the governor’s website.

Most California public pensions get actuarially required contributions. Unlike Illinois, nearly all of the retirement systems here have the power to set annual rates calculated by actuaries that must be paid by state and local government employers.

(The bankrupt city of San Bernardino stopped making payments to the pension fund. The California Public Employees Retirement System is asking a federal court to find the city ineligible for bankruptcy and a state court to force payment.)

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