Pension’s Rate of Return Plummets to 0.76%

This sounds like a problem:

The pension fund for most public school teachers in Illinois generated just 0.76 percent in fiscal 2012, a big drop from the 23.6 percent rate of return in the previous fiscal year, the Teachers’ Retirement System reported on Thursday.  …

It is the long-term results that matter and the system’s 20-year investment return at the end of June was 7.73 percent.”  …

Last month, the pension fund for teachers in all Illinois school districts with the exception of the Chicago Public Schools, lowered its long-term assumed investment rate of return to 8 percent from 8.5 percent.The move will depress TRS’ funded ratio to 42.5 percent and increase Illinois’ fiscal 2014 payment to the fund to $3.36 billion instead of $3.07 billion under the previous return rate.

via Crain’s Chicago Business.

Indeed a problem.  Consider …

A drop in the assumed rate of return from 8.5% to 8.0% meant that the state (that’s you and me, a/k/a the taxpayers) owed an extra $300,000,000.  Hummm….

TRS’s board members, appointed by The Machine, like to quote the 20-year ROR because it’s a respectable 7.73%.  That’s true.  But as I wrote about this before, the 10-year ROR is a pathetic 5.7%.

The fact remains that TRS is in some real trouble.  Everyone knows it.  And the longer we keep our head in the sand the more painful it’s going to be to fix.