Journalist in Residence
Wouldn’t it be great if every time we made a bad investment decision a fairy godmother waved her magic wand and made its consequences disappear?
Guess what? You, Illinois taxpayer, are someone’s fairy godmother.
Teachers union representatives control the board that oversees the Teachers’ Retirement System, Illinois’ largest public pension plan that serves public school teachers except those in Chicago.
But the unions aren’t responsible for making up the difference when the TRS board makes bad investment decisions.
When that occurs, the unions expect taxpayers to sprinkle cash like pixie dust and make the problems go away. This is happening now.
The TRS board originally projected an investment return of 8.5 percent for the fiscal year ending June 30 but instead managed a paltry 0.76 percent. For the same period, the Standard & Poor’s 500 index grew 7.39 percent and the Dow Jones industrial average rose by 7.92 percent.
And this isn’t the first time that TRS’ investment returns have been disappointing. Before this year, the five-year average rate of return was only 4.1 percent, and the 10-year average was 6 percent.
Most of us working in the private sector depend on 401(k) plans, IRAs and similar arrangements to fund our retirements.
Such plans are largely self-funded and self-directed. If we invest poorly, we are responsible. If we make smart decisions, we reap the rewards.
In other words, we have personal responsibility for our choices. Not so with public employee unions.
Even with union members controlling a majority of seats on the TRS board, they have been unwilling to accept that with power comes responsibility.
They stand by a view — that their pensions can never be diminished, no matter what.
Make no mistake, the Legislature and several governors promised public employees more than the state could afford and for years failed to make the state’s required contribution to its five public pension funds.
They bear much of the responsibility for the current pension crisis. But the public unions aren’t blameless.
Current and retired teachers elect six members of the TRS board, the governor appoints six and the state education superintendent is the 13th member.
In 2008, Gov. Pat Quinn broke with tradition and appointed an extra union member, giving the unions majority control of the board. None of the board members are directly accountable to Illinois taxpayers.
At times, political influence rather than financial competence has dictated how to invest the pension fund’s money.
The TRS board now claims that it has been asking for too little. Its demand? It would like taxpayers to pony up more cash.
But we can’t keep pouring more money into Illinois’ faltering pension systems at the expense of core government services, such as education.
Comprehensive pension reform should be the first order of business, and legislators must act to achieve it as soon as possible.