Monday, August 29, 2016
State Owes Hundreds Of Millions After Rauner Fails To Block Vote
Gov. Bruce Rauner unsuccessfully waged a last-minute battle to block the downstate and suburban teacher pension system from making a move that puts the cash-strapped state government "on the hook" for hundreds of millions of dollars more in the short term, according to the Chicago Tribune.
At issue was whether the Illinois Teachers Retirement System board should lower expectations about how much the fund might earn in the stock market. For the past two years, the TRS has assumed that its investments will earn an average rate of return of 7.5 percent. However, this time actuaries argued the figure should be closer to 7 percent, given widespread belief that retirement funds won't continue to perform as well as they have in recent years.
The board voted for 7 percent, which is estimated to cost the state an extra $400 to $500 million a year, an expense that will be due by next July.
Rauner and his team made an effort to block the vote after his office learned the TRS board planned to vote. Had the move been successful, Rauner may have had the majority of the votes on the board. The board is comprised of 13 members - six trustees appointed by the governor, six chosen by pension system members and is chaired by state superintendent of the schools, who is appointed by the governor as well.
However, Rauner made a mistake by attempting to fill one of those seats with a person from Chicago. State law requires that appointees reside in an area that is covered by the retirement system, but Chicago teachers have their own pension system that aren't covered by the TRS.
Rauner's staff called the mistake a result of "miscommunication."
A very costly miscommunication indeed.
Information provided by The Chicago Tribune