How Does Governor Pritzker’s Proposed Pension Contributions Compare to Current Law?

Updated April 11, 2019 at 11 AM. The previous version of this post had inaccurate numbers for TRS and SERS (more about this at the end of the post).

The State of Illinois’ pension contributions would be about $1.1 billion less in state fiscal year 2020 than required under current law, according to my analysis of Governor J.B. Pritzker’s introduced budget, as shown in the chart below.

$ BillionsFY2020 Current Law
All Funds
FY2020 Pritzker Proposal
All Funds
Difference
TRS$4.81$4.24($0.57)
SURS$1.86$1.63($0.23)
SERS$2.29$2.01($0.28)
GARS$0.03$0.02($0.01)
JRS$0.14$0.13($0.01)
Total$9.13$8.03($1.10)

Note: the contributions shown above are for ALL funds (not just the General Fund), and all numbers have been rounded.

Sources: the Governor’s proposed figures are from Table I-A of the budget book (for SURS, GARS and JRS) and analysis of the the Operating Budget Detail excel (for TRS and SERS); current law figures for TRS, SURS, GARS and JRS are from the Commission on Government Forecasting and Accountability, p. 12 here; current law figure for SERS excludes debt service payments for pension obligation bonds and is from p.8 of the 2018 actuarial report.

The table above compares what Illinois is required to pay to each of the five pension systems in FY2020 under current law versus the contributions that are in Governor Pritzker’s budget proposal for FY2020. To be extra clear, I’m not comparing the actuarial recommended contributions with current law (actuarial recommendation is based on 100% target in 20-30 years; Illinois law is 90% target by 2045); for a comparison like that see Figure 3 in this report).

How is that $1.1 billion decrease accomplished? The details in the budget proposal are a bit thin (see pages 35-36 of the budget proposal), but they involve a number of pension related changes. The two main items are extending the repayment timeline past 2045 to 2052, and making an already existing pension acceleration program permanent. (The acceleration program is for Tier-1 members, and is currently temporary. You can read details of the program here.)

I’m not entirely sure how the estimates for any of the items in the Governor’s proposal were determined, assumptions used, or what savings from the acceleration program have materialized thus far. This post isn’t meant to wade into those proposals, or really even explain them. Instead, it’s just meant to provide a quick comparison of the proposed 2020 payments to what’s required under current law.

In addition to the above mentioned pension changes there are a few other ideas in the Governor’s budget proposal. These are: issuing a Pension Obligation Bond, dedicating a portion of new revenue generated from a graduated income tax to the pension systems, and potentially transferring state assets to the pension systems. (A taskforce has been put together to study the possibility of transferring assets to the pension systems.) All three of these items could boost the pension systems’ assets.

Overall the Governor’s introduced budget contains a number of unique pension proposals. Each one merits close examination to understand the details, dig into how projected savings (or costs) were estimated, and careful consideration of whether it’s a prudent policy for the state to adopt.

So Why Did I have to Update this Post? A Dive into Budget Weeds

I previously had inaccurate numbers for TRS and SERS for the Governor’s FY2020 proposal–the figure for TRS was too high and the one for SERS was too low. I think it’s worth explaining what I had to correct and why because it highlights the complexity of the budget, the importance of understanding exactly what a budgetary figure is, and making sure that when numbers are compared it really is an apples-to-apples comparison.

When I initially compared the Governor’s proposed pension payments with what’s required under current law I pulled all of the figures for the Governor’s proposal from “Summary Table I-A Operating Appropriations by Agency – All Funds” in the budget book.

Summary Table I-A had the total SERS contribution for FY2020 as $1.30 billion, as detailed in the table below.

SERS contributions from p. 75 of the FY2020 Operating Budget book.

Notice in the above image there are no Other State Funds contributions recorded to SERS. This should have signaled to me in that the table wasn’t actually showing the state’s total contributions to SERS, but sadly I missed that clue. While a large portion of the total SERS annual payment is made as a lump-sum via the General Fund, smaller amounts are made from individual agencies via their budgets. So, getting the full SERS contribution requires pulling out line-item SERS contributions from all state agencies (not the easiest task). The relevant appropriation line-items I identified are “Retirement” and “State Paid Retirement.” Extracting out these line-items requires working with the Operating Budget Detail excel, which is available here. I found nearly 200 relevant line-items, which totaled roughly $702 million. My $702 million figure is a bit low though because some agencies have lump sum appropriations, and out of those lump sums SERS contributions will be made (the difference is likely tens of millions of dollars). In the end, my revised estimate for the Governor’s total proposed 2020 pension contribution to SERS is $2.01 billion (the lump sum payment plus the line-items; the numbers don’t perfectly add up due to rounding).

For TRS, the figure in my previous post was too high. Again, I originally pulled the total proposed FY2020 TRS contribution from Summary Table I-A, which is shown below (the 2020 figure is highlighted).

TRS contributions from p. 75 of the FY2020 Operating Budget book.

The $4.63 figure for FY2020 in that table was inaccurate for my purposes because it included appropriations for the Teachers’ Retirement Insurance Program (TRIP) and the Chicago Teachers’ Pension Fund (CTPF). Subtracting out those line items again requires working with the Operating Budget Detail excel. Combined, the TRIP and CTPF line-items total about $396 million, so getting the accurate TRS pension contribution requires subtracting that amount from the $4.63 billion figure, which is how I got the Governor’s proposed pension contribution to TRS for FY2020 to be an estimated $4.24 billion.

A big thank you to Daniel Hertz and Laurie Cohen who each prompted me to re-examine the numbers in my original post, and helped me figure out the accurate numbers for TRS and SERS! Any remaining errors are mine and mine alone.

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