Lawmakers’ pension fund posts negative investment return

For the third time in the last five years, the General Assembly Retirement System (GARS) has posted a negative investment return. Although the pension fund predicted it would earn $4 million in fiscal year 2012, it actually lost $81,448. The fund posted an investment return of -0.14 percent, far below the 7 percent it expected....

For the third time in the last five years, the General Assembly Retirement System (GARS) has posted a negative investment return. Although the pension fund predicted it would earn $4 million in fiscal year 2012, it actually lost $81,448. The fund posted an investment return of -0.14 percent, far below the 7 percent it expected.

Of course, this isn’t the first time GARS investments have come in below expectations. The system’s five-year average rate of return is now -0.1 percent. Even before this year, the five-year average rate of return was only 3.1 percent, and the 10-year average was just 4.5 percent. And when investment returns come in under projections, it falls on taxpayers to make up the shortfall.

Ultimately, there are only two numbers that matter: the amount of money the pension fund will pay out for earned benefits and the amount of money it has on hand. Between now and 2045, GARS is scheduled to pay $895 million to retired lawmakers. It has just $52.7 million on hand. For these assets to cover future payouts, GARS would need to see average investment returns of 41.6 percent per year.

GARS is broke. Under new accounting rules, the fund has less than 12 percent of the money it should have in the bank today to make its pension payments. The system doesn’t even have enough money on hand to pay out benefits to the lawmakers who have already retired.

Without real reform, pensions will continue to crowd out funding for core government services, like education. And the longer lawmakers delay action, the worse Illinois’ pension debt crisis will become. Legislators can’t ignore the math any longer. Only major reforms, like those centered on defined-contribution plans and those tackling the automatic cost-of-living adjustment, can get the problem under control.