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TRS ‘not crying’ over latest .76 percent investment return

Story Created: Oct 26, 2012 at 8:50 AM CDT

Story Updated: Oct 26, 2012 at 8:51 AM CDT

By Jayette Bolinski | Illinois Watchdog

SPRINGFIELD — A dismal return on investments in Illinois’ Teachers’ Retirement System last year is a signal it’s time for changes in how the system operates, one observer said Thursday.

The system’s investments earned a .76 percent rate of return in fiscal 2012, compared to a 23.6 percent rate of return the previous year, according to an update from TRS Thursday.

TRS officials played up the system’s long-term investment performance, as opposed to focusing on the latest return.

“We will always take a long-term view of investment returns because TRS has to be there for our members for decades to come,” said Dick Ingram, executive director of the system. “We didn’t do handsprings over 23.6 percent last year, and we aren’t crying over .76 percent this year.”

But the latest return should be cause for panic, said Ted Dabrowski, vice president of policy at the Illinois Policy Institute, a right-leaning think tank based in Chicago. Furthermore, he said, it could contribute to TRS asking taxpayers to foot more of the bill for a system that is “woefully underfunded.”

“I think the bottom line is that the current arrangement we have is not an appropriate one for either the retirees who are counting on broken promises, or for the taxpayers who have to keep footing the bill when the pension system is underfunded,” Dabrowski said.

“It’s time for fundamental reform, and that means moving toward a system that has a stronger defined contribution, much like the 401k in the private sector.”

In September, TRS reduced its long-term investment return target to 8 percent, from 8.5 percent. The system’s investments earned 9.3 percent during the 30-year period that ended in 2011.

Ingram noted that the latest .76 percent rate of return is in line with investment returns for the same period by other large public pension systems across the country, including the California Public Employees’ Retirement System, which had a 1 percent return, and Maryland State Retirement and Pension System, which had a .36 percent return.

Illinois’ Teachers’ Retirement System is the 39th largest pension system in the country. It has 366,000 members and assets of $36.3 billion as of June 30.

“Every single time these systems fail to meet their returns, all they do is turn around and ask for higher contributions from the state to make up the difference. And taxpayers are tapped out,” Dabrowski said.

Contact Jayette Bolinski at jayette.bolinski@franklincenterhq.org.

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