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Illinois' unfunded pension liabilities reach $130 billion: study

CHICAGO (Reuters) - The financial condition of Illinois’ five state pension systems worsened during 2016 with unfunded liabilities growing to a record-setting $129.8 billion, a new report showed on Wednesday.

The nearly 17 percent surge was the result of lowered long-range investment return assumptions by four of the five pension systems and poor investment returns during 2016, the state Commission on Government Forecasting and Accountability (CGFA) reported.

The combined funded ratio of the five pension systems dropped from 41 percent in fiscal 2015, a level that put Illinois in a tie with Kentucky for the lowest-funded state pension system in the country.

Illinois’ new funded ratio now stands at 37.6 percent, said the agency, which is the nonpartisan fiscal research arm of the state legislature.

In a state that is already a national symbol of fiscal dysfunction, the declining pension numbers represent another indicator of how 17 months of budgetary feuding between Republican Governor Bruce Rauner and the Democratic-controlled legislature is inflicting serious fiscal harm to Illinois.

During fiscal 2016, the largest state pension fund, the Teachers’ Retirement System, and the State Employees’ Retirement System lowered their assumed rates of return to 7 percent from 7.5 percent and 7.25 percent, respectively.

The Judges’ Retirement System and General Assembly Retirement System reduced their assumed rates of return to 6.75 percent from 7 percent. The State Universities Retirement System did not alter its long-range investment return estimation.

Combined, those moves led to an increase of more than $9.6 billion in overall accrued liabilities for all five pension systems, accounting for nearly three-quarters of the overall increase in unfunded liabilities from $111 billion in fiscal 2015, CGFA reported.

The other driving force was poor investment returns during fiscal 2016, ranging from a 1 percent drop for the General Assembly Retirement System to a 0.2 percent increase for the State Universities Retirement System, which was the best-performing state fund, CGFA said.

Editing by Matthew Lewis