Illinois Pensions’ Unfunded Liabilities Rise $17 Billion

Illinois’ public pension funds’ total unfunded liabilities increased $17 billion between 2015 and 2016, while their funded ratio fell 1.5% to 47.9%, according to the Illinois Department of Insurance.

In its recently released 900-page biennial report on the state’s public pensions, the Illinois Department of Insurance’s public pension division said the aggregate value of accrued liabilities grew $23.3 billion to $355.4 billion in fiscal year 2016 from $332.2 billion in 2015, while the aggregate actuarial value of assets increased $6.3 billion to $170.2 billion in 2016 from $163.9 billion in 2015. Meanwhile, the aggregate value of unfunded accrued liabilities rose to $185.2 billion in 2016 from $168.2 billion in 2015, while the aggregate funded ratio dropped to 47.9% in 2016 from 49.4% in 2015.

Illinois has 671 public funds, 15 of which are large, statewide and state-financed funds, city of Chicago funds, or Cook County funds. The remaining 656 are police and fire funds located outside of Chicago, which are locally financed in municipalities with more than 5,000 residents, but fewer than 500,000, employing a full-time police or fire workforce.

For the 15 largest state pension funds, the value of accrued liabilities increased to $332 billion in 2016 from $309.8 billion in 2015, while the aggregate actuarial value of assets grew to $156.7 billion in 2016 from $151.1 billion in 2015. The aggregate value of unfunded accrued liabilities was $175.3 billion in 2016, compared to $158.7 billion in 2015, while the aggregate funded ratio of the 15 largest funds declined to 47.2% from 48.8%.

Among the 656 suburban and downstate police and fire pension funds, the value of accrued actuarial liabilities moved up to $23.4 billion in fiscal year 2016 from $22.4 billion in 2015.  Over the same time frame, the aggregate actuarial value of assets increased $600 million to $13.5 billion from $12.9 billion. Meanwhile, the aggregate value of unfunded accrued liabilities was $9.9 billion in 2016, up from $9.5 billion in 2015. The smaller funds reported, on average, a higher funded rate than their larger counterparts, with a 57.6% funded ratio in 2016, which edged up from 57.4% in 2015.

In the report, the department of insurance recommended that the requirement to perform compliance audits be changed from a three-year cycle to a periodic examination cycle based on a risk-review framework.

“The recommended risk-review framework would entail periodic reviews of compliance issues having a material impact on the pension funds,” said the report. “Risk-review may include ratio and trend analysis or risk factors such as a lack of policy and procedures, liquidity shortfalls, investment shortfalls, large fluctuations in expenditures, and/or outliers in benefit awards.”