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TRS Sets the State's FY2020 Contribution at $4.81 Billion

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SPRINGFIELD, IL – The Teachers’ Retirement System Board of Trustees has given final approval to a $4.813 billion state contribution to the System for fiscal year 2020, a 10.6 percent increase over the current fiscal year’s contribution.

The FY 2020 contribution falls short of the amount of money that actuaries calculate would “fully fund” the cost of TRS pensions in the new fiscal year. The FY 2020 statutory contribution is $3.065 billion below the full funding amount of $7.878 billion.

The current FY 2019 state contribution to TRS is $4.47 billion. This amount falls $2.93 billion short of the estimated “full funding” contribution for the year of $7.4 billion. Since its founding in 1939, TRS has never once received an annual contribution from state government that equaled full funding.

“Only 24 percent of the fiscal year 2020 contribution actually covers the cost of teacher pensions,” said TRS Executive Director Dick Ingram. “The vast majority of what the state has to pay TRS every year makes up for underfunding the System over the last 80 years. The TRS unfunded liability is the direct result of using money that should have gone to teacher pensions for other purposes.”

If TRS did not carry an unfunded liability of $75.8 billion, the FY 2020 contribution to the System would be $1.2 billion, not $4.8 billion.

The TRS Board is required each year to calculate and certify the state’s annual contribution to the System for the next fiscal year. That contribution is reviewed by the State Actuary before it is included in the state budget for the upcoming year.

In other news from the Board’s regularly-scheduled December meeting:

  • The administrative rules for two new “Accelerated Pension Benefit Payment” programs were approved.
    • The first program for retiring Tier 1 members is scheduled to begin in January of 2019. Tier 1 members will have to make a choice between the existing 3 percent annual increase in their pensions and a 1.5 percent increase. If they choose the 1.5 percent increase, they receive a lump-sum check equal to 70 percent of the difference between what they would receive in retirement under the 3 percent increase and what they would receive under the 1.5 percent increase.
    • The second program would partially “buy out” inactive members who are eligible for an eventual pension. These members would receive a lump sum equal to 60 percent of their expected lifetime retirement benefit.
    • Funding for the programs depends on the sale of $1 billion in state bonds by the Governor’s Office. Those bonds have not yet been sold.
  • Within the $27.1 billion Equity Portfolio:
    • The commitment of €87 million to Tristan Capital Partners, of London, United Kingdom for real estate investments.
    • The termination of Levin Capital Strategies, of New York, New York. Levin had administered $439.8 million in TRS assets.
    • The termination of Channing Capital Management, of Chicago. Channing had administered $157.1 million in TRS assets.
  • Within the $12.2 billion Global Income Portfolio:
    • The commitment of $75 million to Pemberton Capital Advisors, of London, United Kingdom. Pemberton currently administers $46.4 million in TRS assets.
  • Within the $7 billion Real Assets Portfolio:
    • The commitment of $150 million to Lion Industrial Trust, of New York, New York. Lion currently administers $406.8 million in TRS assets
  • Within The $5.5 billion Diversifying Strategies Portfolio:
    • The commitment of $100 million to Tilden Park Capital Management of New York, New York. Tilden Park currently administers $119.1 million in TRS assets.
    • A redemption of $300 million from Bridgewater Associates, of Westport, Connecticut. Bridgewater continues to administer $445.5 million in TRS assets.
    • A redemption of $200 million from AQR Capital Management of Greenwich Connecticut. AQR continues to administer $2.38 billion in TRS assets.

About Teachers’ Retirement System

The Teachers’ Retirement System of the State of Illinois is the 37th largest pension system in the United States, and provides retirement, disability and survivor benefits to teachers, administrators and other public school personnel employed outside of Chicago. The System serves 417,292 members and had assets of $51.8 billion as of September 30, 2018.

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