Joshua Rauh recently released a study that made bold predictions about when the asset pool of a state’s pension system would run dry. Illinois topped the list with a “Year Run Out” estimate of 2018–just eight short years away. Really?
Well, apparently so. I recently came across this article in Bloomberg BusinessWeek that states:
Illinois’s Teachers Retirement System may sell $3 billion of investments to pay for benefits this year because the state can’t make its contributions to the fund, a spokesman said.
The pension plan sold $200 million of assets in July and $290 million in August, Dave Urbanek, spokesman for the $33 billion fund, said in a phone interview.
“We understand from the comptroller that there is no money to pay us,” said Urbanek. “If we don’t get a state contribution, we will have to sell more.”
The fund was forced to sell assets last year, too, as it awaited a state contribution. That payment came after Illinois issued $3.47 billion of taxable bonds to fund its pension contribution in January.
Wow, $3 billion is almost 10 percent of the value of the fund! In eleven years, the asset pool will be completely gone with withdrawals of that size. I guess Rauh is pretty much right–eight years, eleven years, close enough. If I was a retired teacher in Illinois, I would be afraid . . . very afraid. Then again, if I was a taxpayer in Illinois I would be even more afraid.