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Unfunded liability grows for Illinois teacher pensions

Friday, 25 Oct 2013 | 5:13 PM ET

CHICAGO, Oct 25 (Reuters) - Illinois's Teachers' Retirement System, the state's biggest public pension fund, said on Friday that its unfunded liability grew by 7 percent in the latest fiscal year even as investment returns jumped, driven by chronic underfunding by the state.

The Teachers' Retirement System (TRS) said its funding gap rose to $55.73 billion as of June 30, up from $52.08 billion at the end of fiscal 2012 because the state's pension contributions continue to fall short of actuarial requirements.

The fund said it had a 12.8 percent return on investments in fiscal 2013.

"This increase in the system's unfunded liability, even with good investment results, is another wake-up call to state officials and our members that TRS long-term finances continue to head in the wrong direction," the fund's executive director, Dick Ingram, said in a statement.

TRS gave preliminary approval to a $3.412 billion contribution for fiscal 2015 using a state statutory formula. The pension system said that a $5.3 billion contribution would be needed to keep the unfunded liability from rising further.

Illinois lawmakers have been struggling to address a collective $100 billion unfunded liability for the state's five retirement funds that resulted from years of skipping or skimping on pension payments.

A special legislative panel created in June to address pension reform did not have a proposed fix ready for lawmakers to take up in the first half of the General Assembly's fall session, which took place this week. Lawmakers are to return for the second half of the session on Nov. 5.

Inaction on pensions has helped hammer the state's credit ratings to the lowest level among the 50 U.S. states and has driven up its borrowing costs in the U.S. municipal bond market.

TRS said it has never received a full actuarial contribution from Illinois since it was created in 1939. TRS, the 39th largest pension system in the United States, serves 389,900 teachers, administrators and other school personnel and had assets of $40.97 billion as of Sept. 30.