Illinois TRS May Sell Up to 10% of Investment Portfolio

(August 25, 2010) — The $33 billion Illinois Teachers’ Retirement System may sell $3 billion of investments, or about 10% of its $33.1 billion in assets, to finance benefits this year, as the state is unable to make its contributions to the fund.

TRS is not alone, as the state’s five major pension funds project potential asset sales of more than $5 billion this fiscal year, which began July 1. The State Universities Retirement System of Illinois also will have to sell $1.2 billion of its $12.2 billion in assets to pay pensions if the state does not help finance, while the Illinois State Board of Investment may need to sell $960 million, or nearly 10%, of its $9.9 billion in assets.

To raise funds, the pension funds will have to sell stocks, bonds or other investments.

Yet, legislators recessed this spring without approving a plan to cover this year’s pension obligation, with no movement scheduled before the November elections.

This is not the first time TRS has been forced to sell assets. The pension sold $200 million of assets in July, and another $290 million in August. Last year, the fund — the fifth Illinois statewide defined benefit scheme to divest investments this year to pay benefits — borrowed $3.47 billion to make its annual contribution to what is one of the nation’s most underfunded pension systems. “The reason we’re selling assets is the same reason as last year,” TRS’ information officer Dave Urbanek told ai5000. “For two years, the assembly has authorized state contributions, but there’s no money for it. This year, assembly has authorized $2.35 billion for TRS, but there’s no cash.” Urbanek also confirmed that at the end of 2009, TRS’ unfunded liability was 47.9%.