Politicians Ignore $118 Billion Unfunded Retiree Liability

Those same politicians have proposed a law to save us from the terror of plastic bags.

On January 27th Democratic Rep. Jack Franks of McHenry proposed legislation (HB0334) to outlaw the scourge of plastic bags in Illinois. Ever vigilant Republicans, sensing a political opening, have called for a “Dog Droppings Committee” to study the “moral hazard” of plastic bag elimination. Andy McKenna is threatening a “Dog Dropping” march on Springfield to fight this latest Democratic power grab. Rod Blagojevich may be called to testify whether he ever took money from Poop PAC’s.

Unfortunately for Illinois taxpayers, Springfield politicos of both parties have managed to ignore the biggest problem facing Illinois: how to pay for skyrocketing, taxpayer guaranteed public employee pensions and health care. This is symbolic of the priorities established by our elected officials. How do we go about impeaching all of them?

The silence on the issue of how to pay $118 Billion is deafening. As bad as it was last year, this year is much worse. The TRS (Teacher Retirement System) UAAL (Unfunded Actuarial Accrued Liability) went up by a gargantuan $16.3 billion or 39% on the value of assets in the 15 months ending 11/30/09. The SURS (State University Retirement System) UAAL went up $5 billion, and SERS (state Employees Retirement System) went up $5 billion. And unfunded retiree health insurance was documented for the first time: $ 42 billion. Throw in the liability for Chicago Teachers Pension Fund and the IMRF (Illinois Municipal Retirement Fund) and we sit at a nice $118 billion.

Here’s the breakdown:


Illinois  Public Employee Retirement Unfunded Liability $118 BILLION

Unfunded Pension Liability


Health Insurance


   Total Unfunded Liability

Pension Liability      
Teachers Retirement System




State University Retire. System


  State pays


State Employee Retire System




Chi Teachers Pension System




Community College Insurance  



Ill Municipal Retirement System








1. Insurance costs as of 06/30/2007    
2. TRS, SURS as of 09/30/2008      
3. Chicago as of 06/30/2007      
4. IMRF as of 08/30/2008      
TRS, SURS, SERS Pensions  – Actuarial Valuation Reports 06/30/2008.
IMRF – IMRF Website Memo 08/30/2008, update of 2007 CAFR
Chicago Teachers CAFR 06/30/2007    
TRS, SERS, Community College Insurance Liability – Illinois Auditors Reports 06/30/2007


And it is probably worse than that since the pensions are as of 2008 and the insurance funds as of 2007 while worldwide financial markets continue to implode.

Keep in mind that UAAL (Unfunded Actuarial Accrued Liability) is just what we would have to pay to bring us up to even. We would still have to pay the normalized pension and health insurance going forward.

According to GASB Rule #43 (Government Accounting Standards Board) the state is required to provide the amount of Post-employment benefits in detail but this being Illinois we have only the gross amount and that is for 2007. The June 30, 2008 State of Illinois CAFR (Comprehensive Annual Financial Report) is not available yet. Exxon provides their financials within 30 days, but we don’t know what the State of Illinois’ financials are 9 months after they are due. Apparently, we have more important things to worry about like plastic bags.

Although we don’t have all the numbers we can estimate some of the ongoing health care costs because the Chicago Teachers Pension Fund has done it. According to their actuaries the health care liability will require another 11.24% contribution from the taxpayers for every dollar of payroll. Adding that percentage to the 27.5% we are already contributing for pensions means we taxpayers will be contributing 38.8% of every teacher’s salary to their retirement. That’s 38.8% compared to the average private sector workers 12.65% (7.65% FICA plus 5% 401K). It is easy to see why retired teachers are millionaires and retired private sector taxpayers are paupers.

You may be wondering how much these outrageous pensions are worth compared to a 401K or IRA account. According to Vanguard Annuities (the lowest cost annuity I could find) a female age 56 with a $100,000/yr pension guaranteed for life with built in cost of living adjustment would have to have the equivalent cash value in her 401K or IRA account of $2.25 MILLION.

How many people do you know who have $2.25 MILLION in their 401K or IRA? The average TRS pension for 2008 for a teacher retiring with 35 years at age 56 was about $58,000. That average $58,000 retirement is worth a 401K cash value of $1.3 million. How many people do you know with $1,3 million in their 401k or IRA?

Those are outrageous enough but in 2008 some new pensioner from TRS received their first year pension of $238,000. That is worth an amazing $5.3 million in cash.

And, of course, these million dollar pensions come with no investment risk and virtually no job risk. The investment is guaranteed by the taxpayers and the jobs are guaranteed via tenure therefore these millions are obtained with no risk to the millionaire. While your 401K value probably tanked this year teachers pensions went up by 3%. Thus though you have less wealth than last year you now have to pay more taxes for other peoples pensions rather than for your own. Your retirement income, and ability to pay taxes, is going down while theirs is going up.

The taxpayer liability for public employee retirement, pension and health-care, is the single most important issue facing Illinois. It is the 800-pound gorilla in the room. Obviously, powerful special interest groups are delaying the day of reckoning as long as they can and compliant politicians are following their lead. It is up to the citizens to mount a relentless campaign against this political payoff.

So contact your local representative and senator today. Send them copies of the reports and charts at the end of this article and demand they deal with this issue now. Your children and grandchildren are depending on you.

Contact Your Representative or Senator: www.ilga.gov.

Bill Zettler is the owner of a computer-consulting firm in Illinois and a contributor to ChampionNews.net.