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The 2012 fiscal year was supposed to be when the state finally made timely and full payments to the five state-funded pension systems that provide retirement benefits to teachers, university employees, state workers, lawmakers and judges.

The 2012 fiscal year was supposed to be when the state finally made timely and full payments to the five state-funded pension systems that provide retirement benefits to teachers, university employees, state workers, lawmakers and judges.

But even with enough money allocated in the state’s general revenue fund to cover what it owes, the state remains behind in its payments to the pension systems, according to a database of unpaid bills created by The Associated Press. That could affect the funds’ investment returns and long-term health.

Altogether, the state is about $391 million behind in its payments to the Teachers’ Retirement System, the State Employees Retirement System, the State Universities Retirement System, the Judges Retirement System and the General Assembly Retirement System, according to the AP database, which compiled unpaid bills through the first week of September. TRS provided its own, updated numbers for this story.

Given the state’s track record and uncertainty in previous years about whether the retirement systems would even get the money they were owed, their representatives aren’t complaining about the backlog.

“In the context of the last two fiscal years, we’re in a much better position this year,” said William Atwood, executive director of the Illinois State Board of Investment, which handles investments for SERS, JRS and GARS. “The state has affirmed to the systems that they’re going to make their payment this year. They’ve been making the payments, either the partial or total payment for July, August and September … In terms of the fiscal health of the portfolio in this fiscal year, we’re in a much better position than we were the last two fiscal years.”

 

December deadline

Today, the state is about $281 million behind on its payments to TRS during fiscal 2012, according to numbers provided by the system. When the AP database was compiled, it was about $200 million behind.

“That’s two months behind,” said TRS spokesman Dave Urbanek. “In the grand scheme of things of what state government owes vendors, we’re thankful to be in that position.

“They’re not paying completely on time, but we’re grateful and thankful the General Assembly has passed the bill early to give us the money off the top, and they’re on the schedule.”

Brad Hahn, spokesman for Comptroller Judy Baar Topinka, said the comptroller is trying to clear out the bills from fiscal 2011, which ended June 30, before a December deadline to do so. State law allows “lapse-period spending” — a set amount of time in which the previous year’s bills can continue to be paid off even though it’s a new fiscal year.

“We have not paid the systems in full in order to pay off fiscal year 2011 bills before the end of the lapse period in December. Each system was paid a portion of their allotment and will receive the balance in the second half of this fiscal year,” Hahn said. “We have coordinated this with each of the retirement systems to make sure they have the immediate funding needed to make pension payments.”

 

Assets sold off

In previous years, the lack of payments by the state meant the premature sale of assets in order to pay out benefits to retirees. When that happens, the systems don’t just lose the current value of the assets, they also lose future investment income from them being sold.

“We did have to sell more assets than we normally do in a year for cash-flow purposes. We did have larger losses from investment income because the money wasn’t there,” Urbanek said.

Still, the late payments will mean that some assets will have to be sold, albeit on a lesser scale than in previous years.

“We’re still confident we’re going to get our full appropriation this year, but it’ll be backloaded to some extent, so we’re going to sell some assets earlier in the fiscal year and then with the expectation to get monies returned to us later in the fiscal year,” Atwood said.

“Our life would be easier and everything would run much more smoothly if we knew specifically when the state would be able to transfer assets to pay benefits so that we would be able to plan accordingly. The fact of the matter is, it’s no secret that the state just continues to have these cash-flow problems.”

 

Chris Wetterich can be reached at 788-1523.

 

BREAKOUT

Unpaid bills to pension systems

Teachers’ Retirement System: $200.4 million

State Universities Retirement System: $109.7 million

State Employee Retirement System: $75 million

Judges Retirement System: $5.3 million

General Assembly Retirement System: $875,000

 

Source: AP unpaid bills database

Source : http://www.goerie.com/article/20111015/NEWS/310159969

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