CHICAGO The U.S. Securities and Exchange Commission launched an inquiry into statements put out by the state of Illinois regarding the potential long-term savings from a pension reform law, a spokeswoman for Governor Pat Quinn said on Tuesday.
An offering document for the upcoming sale of $3.7 billion of taxable Illinois pension bonds said the SEC contacted the state in September about "communications relating to the potential savings or reductions in contributions by the state to the Illinois public pensions."
"The SEC has informed the state that the inquiry should not be construed as an adverse reflection on any entity or individual involved, nor should it be interpreted as an indication by the SEC or its staff that any violation of the federal securities laws has occurred," the document said.
Illinois is cooperating fully and is providing information requested by the SEC, it added.
"We feel our disclosures have always been accurate and complete," spokeswoman Kelly Kraft said.
SEC spokesman John Nester declined comment on Tuesday.
A law passed last year was touted by Illinois officials as a major reform to the state's pension system, which has the lowest funding level among the states. The law established a two-tier system that increases the retirement age and reduces pension benefits for employees hired after January 1, 2011.
The Illinois inquiry follows a settlement between the SEC and New Jersey in August over that state's flawed bond disclosures. The SEC said the state had not adequately informed investors of the costs of its pensions. Elaine Greenberg, a top SEC enforcement official, has said the settlement was a warning to all other public debt issuers.
Illinois also said it hired the law firm of Chapman and Cutler in the wake of the New Jersey action to help it review, evaluate and enhance its pension disclosure process.
Meanwhile, the New York Times has reported the SEC may be looking into Calpers, the $226 billion California Public Employees' Retirement System, better known as Calpers.
Earlier this month the Times reported the SEC is looking into whether the state of California violated securities laws by failing to disclose risks attached to Calpers.
The report cited a person with knowledge of the investigation, but Calpers spokesman Clark McKinley said the fund does not have any knowledge of a probe by the SEC: "As far as we know, there has not been any SEC notice of an investigation."
California State Treasurer Bill Lockyer's office also has not been contacted by the SEC regarding any disclosure issues.
"As far as we know there is no probe of Calpers," said Lockyer spokesman Tom Dresslar. "Official statements we provide investors have at all times disclosed all material information with respect to pension obligation."
Loop Capital Markets recently said half of the 50 states were unable to make full contributions to their pension funds in fiscal 2009, and New Jersey put in the smallest amount -- 9 percent of its expected contribution.
Moody's Investors Service also mentioned the inquiry into Illinois pensions when it affirmed an A1 rating with a negative outlook for the state's general obligation bonds late on Monday.
(Reporting by Karen Pierog, additional reporting by Lisa Lambert in Washington and Jim Christie in San Francisco; Editing by Kenneth Barry)