SPRINGFIELD, IL – The Teachers’ Retirement System Board of Trustees certified a $6.04 billion state government contribution for the System in fiscal year 2024.
The FY 2024 state contribution is a 2.5% increase over the state’s $5.89 billion contribution for the current fiscal year. That’s the smallest year-to-year increase in the state contribution in the last decade. During that period, the average annual increase in the state’s appropriation for TRS averaged 6.7%.
“Over the last four years, a steady commitment by Gov. JB Pritzker and the General Assembly to appropriate the full statutory contribution for TRS has helped bring more stability to the System’s finances,” said TRS Executive Director and Chief Investment Officer Stan Rupnik.
The TRS Board is required each year to calculate and certify the state’s annual contribution to the System for the next fiscal year. A preliminary contribution calculated in October was reviewed by the State Actuary, Cheiron, Inc., of McLean, Virginia, prior to final approval by TRS. The certified contribution is now forwarded to state officials for inclusion in the FY 2024 state budget.
The modest increase in the state contribution coincides with continued improvement in the System’s the long-term funded ratio. The TRS funded ratio at the end of FY 2022 was 43.8%, a positive increase over the previous year’s funded status of 42.5%. At the end of FY 2020, the System’s funded status was 40.5%.
The increase in the funded ratio came last year despite very volatile investment markets and uncertainty in the world economy. Most large institutional investors like TRS lost money during FY 2022. TRS recorded an investment return rate of -1.17%. Nonetheless, the TRS rate compared favorably to the median return of -7.6% by large pension systems, according to RVK, Inc., of Portland, Oregon, the TRS general investment consultant.
The funded ratio reflects the difference in the amount of money TRS has in assets against the amount of money the System needs to immediately pay all members the full amounts of benefits they are owed for the rest of time. Altogether, the System’s total long-term liability at the end of FY 2022 was $143.5 billion, a 3.3% increase over the previous year.
While the funded ratio is important as an official measure of the long-term fiscal health of TRS, it is not a reflection of the System’s current financial ability to pay benefits. In any given year, TRS only is obligated under state law to pay out the amount of money owed annually to eligible retired members and other beneficiaries. During FY 2022, paid benefits totaled $7.6 billion. TRS was more than able to pay all benefits for the year on time and in full. In fact, for 83 years TRS has paid all benefits in full and on time.
In other action during its regularly scheduled December meeting, the trustees reviewed the following investment actions:
- Within the System’s $10.2 billion Private Equity Portfolio:
- The commitment of $60 million to Columbia Capital, of Alexandria, Virginia. Columbia currently administers $24 million in TRS assets.
- Within the System’s $12.1 billion Real Assets Portfolio:
- The commitment of up to $150 million to Macquarie Group, of New York, New York. Macquarie currently administers $416.6 million in TRS assets.
- Within the $15 billion Income Portfolio:
- The commitment of $100 million to Locust Point Capital, of Red Bank, New Jersey. Locus Point currently manages $76.4 million in TRS assets.
About Teachers’ Retirement System
The Teachers’ Retirement System of the State of Illinois is the 42nd largest pension system in the United States, and provides retirement, disability and survivor benefits to teachers, administrators and other public school personnel employed outside of Chicago. The System serves 439,000 members and had assets of $60.7 billion as of September 30, 2022.