Rauner is not looking forward to this week’s TRS meet.


IEA President Cinda Klickna will be chairing this week’s TRS board of trustees meeting.

A Reuter’s report by Dave McKinney and Karen Pierog suggests that Illinois Governor Bruce Rauner is not happy with a possible TRS decision to lower the assumed rate of return on pension investments.

A Monday memo from a top Rauner aide said the Teachers’ Retirement System (TRS) board could decide at its meeting this week to lower the assumed investment return rate, a move that would automatically boost Illinois’ annual pension payment.

“If the (TRS) board were to approve a lower assumed rate of return taxpayers will be automatically and immediately on the hook for potentially hundreds of millions of dollars in higher taxes or reduced services,” Michael Mahoney, Rauner’s senior advisor for revenue and pensions, wrote to the governor’s chief of staff, Richard Goldberg.

When TRS lowered the investment return rate to 7.5 percent from 8 percent in 2014 the state’s pension payment increased by more than $200 million, according to the memo.

While TRS investment returns have been weak the last few years, it is considered among the healthiest of investment returns compared to other state pension systems.

That doesn’t improve the $111 billion liability carried by the five Illinois pensions systems, TRS being the largest of the five.

A decision by the TRS board to lower its estimated rate of return would increase the liability. The board is required to submit the estimate each year to the legislature.

The Governor and his people want the board to delay submitting an estimate until after the November election.

Way after.

As I reported earlier, there are three empty seats on the TRS board that the Governor has seemed not to have had any interest in filling until now.

Reports are that Rauner is demanding that no decision on lowering the estimated return until after he names his people to the TRS empty seats. But TRS is scheduled to meet this week with IEA President Cinda Klickna chairing the meeting in place of the expected absence of Rauner’s pick for board President, Tony Smith.

Klickna wears two hats as TRS board member and IEA President.

Since assuming office, Rauner has insisted on pro-corporate, anti-union concessions in exchange for a budget agreement.

This situation doesn’t help him.

9 Replies to “Rauner is not looking forward to this week’s TRS meet.”

  1. Damned if you do, damned if you don’t. Financiers have been warning for months to be truthful with the public concerning lower returns and that adjustments need to be made for future pension stability. Yet when the time comes to do so Rauner won’t consider it unless it suits his re-election timetable.
    Just like automatic voter registration. Partisan politics at its best.

  2. Fred,
    These decisions should not be a political beast, but they have a 30+ year look so should not happen very often. Chances are that if they lower the rate it will be raised again long before any solution tot he problem and will work in the other direction. In other words, net zero over time.

  3. Glen Brown had a post on Jan 10 2015 in which Ingram said clearly that the raw deal teir 2 gets will cover a large part of the deficit. I have never got a clear answer if that has been accounted for. Lies damn lies and actuaries?!

  4. I hope she does her job properly and does not let Rauner influence the decision. Rauner wants her to wait until he can stack the TRS board with appointees who will take orders from him.

  5. Illinois’ Teachers Retirement System reported a 4.6 percent return for the 2015 fiscal year. It will release preliminary returns for the fiscal year that ended June 30 on Friday, Urbanek said.

    Remember guys and gals…we get 3 % compounded each year…..we are getting close to taking money out of our pot….that is the money we invest….one year we made 2%!!!

    1. “We?” C’mon. TRS is funded by employee contributions, school districts, the state of Illinois and return on investments. Investment returns were never intended to be the primary source of funding. Over the past two decades, investment returns on average exceeded the CPI.

  6. Apples, oranges and airplanes. How clueless do some people think we are? There is no meaningful relationship between investment returns and A.A.I percentages that says investment returns must stay above 3% in order for benefits to be paid.

    T.R.S. is an institution separate from state government. (Think A.I.G. instead of Springfield.) It is a pension management organization that collects pension money earned by teachers and invests it to earn even more money. The state treasury doesn’t pay teacher pensions, T.R.S. does. The state just disburses the funds. Tax payments DO NOT pay teacher pensions.

    Even with a 4.6% return, T.R.S. takes in more than it pays out. The same would be true at 1%. The real issue is (and always has been) will the state actually pay into T.R.S. the earned compensation it already owes teachers.

    If all the money in T.R.S. ran out (not likely in the next 20 years, even if no further money were to come in) the state would have to begin to pay pensions out of General Revenue Funds as the payments became due. Even if it meant not paying other bills. (Not a choice, a requirement of the Illinois Supreme Court).

    Funny how these “taxpayers” like to single out teachers. Next they will start in on people with children. Here is how that will go. “No taxpayer with children ever pays the cost of their children’s education (or anything close). We have to pay for them! Unfair!

    It is true that schools cost much more than any parent pays. For every three taxpayers with children there are seven other taxpayers (including some teachers) who also pay the cost. Why do we do it? Because it is one of our responsibilities as a citizen. You don’t get a pass because you don’t have kids. It is part of the price of a civilized society.

    The real freeloaders are often people like Teachers…Wake Up. Anything is OK to say or do if I get to pay less or if you get to pay for me.

    TWU is just fear mongering. A poor effort at that. Maybe TWU thinks teacher earnings still belong to him after it has been paid to us. Maybe TWU holds a bond that might be threatened with non-payment some time in the future. (Even that scenario is not a possibility until T.R.S. runs out of money and the pension system becomes “pay as you go”.) Who knows?

    When teachers work, they get compensation. Teachers decide what forms that compensation will take when they negotiate employment contracts. Part of the compensation is salary. If teachers want better pensions, they give up salary for that benefit. If teachers want other benefits, they trade salary for them as well. Benefits are part of what they earn, just like salary.

    The fact is taxpayers don’t pay earned compensation to teachers, school boards and the state do. Tax payments stop being personal funds when the tax is paid. When school boards (or the state) spend that money on compensation it is no longer theirs either. It belongs to the employee. If you don’t like how it was spent, take it up with the school board (or the state).

    How about having the state actually pay teachers what they have already earned and are owed? Would it be OK if your employer shorted you? How about for 40 or 50 years?

    Is TWU really implying that teachers are greedy? Go troll somewhere else.

  7. One can’t compare the return on investments, be it 4% or 24%, to the AAI of 3%. The latter is 3% of the eligible annuity payroll, while the former is a percentage of the total TRS fund assets. Apples and oranges.
    Fred, I’m going to have to disagree with you on the role of investment earnings in the funding structure. The “ideal” funding structure for a well-funded and managed defined benefit pension plan calls for 20% of revenues to come from member contributions, 20% from employer contributions, and 60% from investment earnings. It’s harder to make that calculation when much of our employer contribution goes to paying the unfunded liability.

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