Our Opinion: TRS chief dares to speak truth

Monday, April 09, 2012

Dick Ingram last year was named executive director of the Teachers’ Retirement System of Illinois after a 30-plus-year career in public and private sector financial management in New England.

Ingram came from a world where basic math tells you two plus two equals four.

Last week, Ingram got a lesson in Illinois public pension math. In that world, two plus two equals whatever you need to keep your people happy — whether your people are pension system enrollees, union members or voters in the next election.
The lesson was: In Illinois, he who commingles “real math” with “Illinois pension math” does so at his own peril.

In a confidential Feb. 9 memo to TRS board members obtained by State Journal-Register reporter Chris Wetterich, Ingram dared speak aloud what many — including this page — have been screaming for years. Without significant reforms, the fund that pays public school teachers’ pensions is on a sure path to insolvency. (We would include the state’s other pension funds in this scenario.)

After talking to lawmakers who oversee the state’s contributions to TRS, Ingram came to the wise conclusion that TRS can’t rely on the state to makes its full contribution every year going forward, despite a 1995 law that requires the state to do so. In fact, Ingram advised repealing that often-ignored law — which mandates 90 percent funding of the state’s five pension funds by 2045 — because it “gives us a false sense of comfort.” Right now, the state owes TRS $43 billion to meet the 2045 deadline.

“(I)t is prudent to assume that we will not be funded at the levels provided in statute,” Ingram wrote to TRS board members. “However constitutionally sound or logical these provisions may be, they cannot print money.”

After making a sober assessment of the state’s financial reality, Ingram ordered the actuarial firm Buck Consultants to conduct three stress tests to determine when TRS might be broke. Using three formulas for the amount the state puts into the system, the tests showed insolvency arriving in 2029, 2037 or 2049. Ingram suggested the guaranteed 3 percent cost-of-living increases for retirees may be the biggest problem.

You’d think that those who now collect TRS pensions or are currently paying into the system would be grateful to Ingram for speaking the truth. Better to sacrifice now and preserve the long-term health of the fund than to suffer its inevitable collapse. But this is Illinois, where we’re trained to rely on pension magic.

Jim Bachman, executive director of the Illinois Retired Teachers Association, said his members were “outraged” at Ingram’s letter and subsequent statements. “They believe the system ought to be fighting for its stakeholders.”

Illinois Federation of Teachers President Dan Montgomery called Ingram’s message “irresponsible.” “He’s basing that on a set of assumptions that may or may not be real,” Montgomery said.

No, he’s basing that on actuarial studies that used very realistic figures based on recent history. That recent history also includes a backlog of unpaid bills that stands at nearly $6.3 billion and exploding Medicaid costs that threaten to bankrupt the state.

It’s not Ingram’s job to fix the funding shortfall. The pension funds don’t make the policy by which the state pays them. That’s up to the legislature. But neither is it his job to ignore reality and trust in a magic solution. If that’s what TRS members want, maybe next time it can hire a director from Illinois.