SPRINGFIELD — Stable state funding over the last two years meant key state employee pension funds didn’t have to sell assets to meet payments in 2013, according to a report released Thursday.
The State Retirement Systems, covering pensions for ex-state employees, judges and lawmakers, withdrew $29.7 million in 2013, down 88 percent from $248.7 million a year earlier, Auditor General William Holland wrote in an annual financial audit of the Illinois State Board of Investment.
The nearly $30 million withdrawal in the fiscal year that ended June 30 is small enough for the Board of Investment to absorb with cash flow, Atwood said. But when withdrawals hit hundreds of millions of dollars, it means selling assets, such as stocks and bonds, highly liquid securities that make up about 80 percent of the board’s $12.9 billion portfolio, he added.
The bottom line is, the more a pension system has to withdraw from its portfolio, even if it’s paid back down the line, the more taxpayers are going to have to pick up in the future because the money isn’t benefiting from compounded interest.
William Atwood, executive director of the Illinois State Board of Investment, which manages the SRS portfolio, said the situation should only improve if recent pension reform legislation holds up.
“Portfolio success is contingent on having assets to invest,” Atwood said. “ ... The main issue in managing a portfolio is, leave as much money in there as possible so it will grow. I think that’s the approach policymakers are taking.”
The state’s five pension systems — including public school teachers and university employees not under the SRS umbrella — are $100 billion in debt, thanks to decades of underfunding by state lawmakers and governors.
But after years of debate, Gov. Pat Quinn signed into law a repair plan that cuts benefits to pensioners but reduces their contribution and includes measures to ensure the state lives up to its future obligations.