So now that the state of New Jersey has been charged by the SEC with lying to bond investors about the (desiccated, horrific, probably insolvent) state of its pension funds, the guessing game begins: Who is next? Exchequer readers will not be surprised to learn that Illinois, the place where Barack Obama developed his famous financial acumen, is on the list of potential targets.
When Illinois passed its pension “reform” law a few months ago, it decided it could skip an additional $300 million in pension contributions this year, and many millions more in the future. This, for a pension system that already is less than half funded. The New York Times asked a few actuaries about that decision, and the bean-counters are crying foul:
Paradoxically, even though the state will make smaller contributions, the report forecasts that Illinois will get its pension funds back on track to a respectable 90 percent funding level by 2045. It projects that costs will increase slowly and an economic recovery will make cash available for the state to make the contributions it has failed to do in the past.
Whether that is even possible is contested by some actuaries who note that its family of pension funds is now only 39 percent funded. (If a company let its pension fund dwindle to that level, the federal government would probably step in, but federal officials have no authority to seize state pension funds.)
Some actuaries who have reviewed the state’s plans said that shrinking contributions would make the pension funds shakier, not stronger.
Indeed, one of them, Jeremy Gold, called Illinois’s plan “irresponsible” and said it could drive the pension funds to the brink.
Further, Mr. Gold pointed out that Illinois’s official disclosures said that its pension calculations used an actuarial method known as “projected unit credit,” but that the pension reform report used another method, which had not been approved for disclosure.
“According to Illinois statute, the prescribed contributions are determined under a method that may not be in compliance with the pertinent actuarial standards of practice,” Mr. Gold said.
The Wall Street Journal has more on state pension shenanigans here.
Hey, taxpayer: How’s your retirement fund looking these days? Anything left to put in it after the state-workers’ unions are done with you? Heck, you’re probably the kind of sucker who pays his mortgage with his own money.