Illinois adopted asset smoothing (Senate Bill 1292 in 2011) to determine the actuarial value of its plan assets. The asset smoothing method uses expected returns on the asset mix and averages both past and anticipated asset values, generally over a period of five years.
Consider the State of Illinois’ consistent underfunding of its annually-required contributions to the pension plans, the transferring of the state’s “normal costs” to the public pensions, the inadequate revenue growth for the long-term costs of public pension benefits, the unfunded pension liabilities and funded ratios, the historical rates of return, amortization periods, discount rates and inflation rates, and the state’s current flat-rate tax system and budget practices, to name just a few. They still need to be addressed.
Consider that the long-term consequences of legislative policy decisions are also based upon preferred and changeable data, that public pensions carry liabilities into perpetuity, and that the immediate effects of any legislation passed will affect primarily middle-class citizens who are victims of an imperfect fact-finding and decision-making processes.
We would agree that claims are considered effective when supported by sufficient, accurate, and relevant evidence; however, will Illinois legislators and the governor agree about evidence and solutions for the state’s public pensions’ unfunded and future liabilities? The answer is NO. The governor and legislators of the State of Illinois will not focus upon solving the state’s revenue and debt problems so that they can decisively commit to a responsible funding for all of the state’s debts.