Last week lawmakers in Illinois wrote a letter requesting a $41 Billion federal bailout to help shore up their state budget woes. Roughly ¼ of that request, or $10 Billion, was to go directly to the state pensions fund. For years, Illinois has suffered from declining pension solvency as they routinely under contributed funds to spend on other priorities. You can read more here.
This letter comes as Illinois bond ratings could soon turn to Junk, a first in the nation. You can find the full letter here.
In our most recent report, we featured the concern that the annual cost of PERA will only increase as a result of this crisis. What we did not consider was the prospect of lowering contributions and worsening the financial position of PERA even further.
Here is an excerpt from a recent John Franks article in the Colorado Sun:
Another big ticket item where lawmakers can reduce spending is the state pension, known as Colorado Public Employees’ Retirement Association, or PERA. The state and employees are required to increase contributions into the fund next fiscal year under a law designed to keep the pension solvent. But now lawmakers are considering hitting the pause button.
“We were trying to address the long-term solvency of PERA” with the increased contributions, said Sen. Dominick Moreno, a Commerce City Democrat and budget writer. “It’s not like the building is on fire the way the state budget could be.”
While it may seem prudent to save a little now and divert contributions away from PERA to other areas of the budget, it would only compound the problem in the future and hamper the state’s economic recovery.
You can read the full Colorado Sun article here.