Assets of state pension systems sag

SPRINGFIELD -- All five state pension systems saw their net assets decrease in the 2012 budget year, primarily because of anemic investment returns.

Audits of the five state-funded systems released Wednesday show the net assets of the systems dropped by nearly $1.5 billion during the budget year that ended June 30, 2012.

The systems still had assets of nearly $62 billion at the end of the 2012 fiscal year.

The systems’ 2012 performance were a reversal from fiscal 2011, when their investment income was higher.

“What this points out is the unpredictability and volatility of the economy,” said Dave Urbanek, spokesman for the Teachers’ Retirement System, the largest of the retirement systems.

Auditors said TRS’s net assets dropped by $954 million in the 2012 fiscal year, the largest decrease of any of the pension systems. TRS made just 0.76 percent on its investments last fiscal year.

The year before, however, TRS made 23.6 percent on its investments.

“As the economy goes, as the markets go, that has a lot to do with the amount of money that we have on hand for our members’ retirements,” Urbanek said.

Pension systems get their funding from investment income combined with employee and employer contributions.

TRS expects to spend $4.7 billion on retirement benefits this year.

“Benefits are covered for this year, next year and the year after that,” he said. “It’s the long-term problem that we see, simply because the cost of pensions continues to rise, and state government has been lax in fully funding TRS. We don’t see that situation getting any better because of the state’s overall fiscal situation.”

The audits reaffirmed the dismal financial status of the pension systems. Overall, auditors said, the systems ended the 2012 fiscal year with a 39 percent funding ratio. That was down from 43.3 percent the year before.

The best-funded of the systems was the State University Retirement System at 41.3 percent. The worst was the General Assembly Retirement System at 17.5 percent.

Doug Finke can be reached at (217) 788-1527.