SPRINGFIELD, IL – The Teachers’ Retirement System Board of Trustees certified a $6.2 billion state government contribution for the System in fiscal year 2025 during its December Board meeting. The state contribution is a 2.7% increase over the state’s $6.04 billion contribution for the current fiscal year.
“A steadfast commitment by Gov. JB Pritzker and the General Assembly to appropriate the full TRS statutory contribution and to contribute $172 million and $115 million in additional contributions to TRS in the past two years has brought more stability to the System’s finances,” said TRS Executive Director and Chief Investment Officer Stan Rupnik.
The TRS Board is required each year to calculate and certify the state’s annual contribution to the System for the next fiscal year. A preliminary contribution calculated in October was reviewed by the State Actuary, Cheiron, Inc., of McLean, Virginia, prior to final approval by TRS. The certified contribution is now forwarded to state officials for inclusion in the fiscal year 2025 state budget.
The modest increase in the state contribution coincides with continued improvement in the System’s long-term funded ratio. The TRS funded ratio at the end of fiscal year 2023 was 44.8%, a positive increase over the previous year’s funded status of 43.8%. At the end of fiscal year 2021, the System’s funded status was 42.5%.
The funded ratio reflects the difference in the amount of money TRS has in assets against the amount of money the System needs to immediately pay all members the full amounts of benefits they are owed for the rest of time. Altogether, the System’s total long-term liability at the end of fiscal year 2023 was $148.4 billion, a 3.4% increase over the previous year.
While the funded ratio is important as an official measure of the long-term fiscal health of TRS, it is not a reflection of the System’s current financial ability to pay benefits. In any given year, TRS only is obligated under state law to pay out the amount of money owed annually to eligible retired members and other beneficiaries. During fiscal year 2023, paid benefits totaled $7.9 billion. TRS was more than able to pay all benefits for the year on time and in full. In fact, for 84 years TRS has paid all benefits in full and on time.
TRS’s Long-term Investment Strategy
As of Sept. 30, 2023, the fair value of TRS’s investments was $65.6 billion. TRS had a total fund annualized return of 10.3%, gross of fees, and 9.5%, net of fees, for the one-year period ended September 30, 2023.
The investment strategy deployed by the System continues to protect member assets while contributing to long-term results. The System focuses its attention on its long-term investment rate of return because TRS has lifelong relationships with vested members. As of September 30, 2023, the 30-year rate of return, net of fees, was 7.6 percent, which bests the System’s estimated long-term investment rate of 7.0 percent.
No new investment hires or commitments were made or announced during the meeting.
About Teachers’ Retirement System of the State of Illinois
The Teachers’ Retirement System of the State of Illinois is the 38th 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 over 448,000 members and had assets of $65 billion as of October 30, 2023.