GRF Expenditures by Category, 1995 - 2006
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Transcript of GRF Expenditures by Category, 1995 - 2006
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© Center for Tax and Budget Accountability 2007
CENTER FOR TAX AND BUDGET ACCOUNTABILITY70 E. Lake Street Suite 1700 Chicago, Illinois 60601 direct: 312.332.1049 Email: [email protected]
Pensions and the State BudgetPrepared by:
Ralph MartireExecutive Director
Thursday, May 17, 2007; 9:30 am – 10:30 am“Pensions Issues”
Illinois Association of School Board Officials56th Annual Conference
Peoria Civic Center201 SW Jefferson St., Peoria, Illinois 61602
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© Center for Tax and Budget Accountability 2007
FY 2007 Appropriations by Agency as a Percent of GRF TOTAL GRF: $25.76 Billion
Illinois State Board of Education
25.4%
Higher Education8.4%
Human Services15.5%
Children and Family Services
3.0%Health Care
30.7%
Corrections4.4%
Other3.9%
Pensions3.9%
Natural Resources0.3%
Administration4.4%
Environmental Protection Agency
0.005%
Agrilculture0.2%
-ISBE and Higher Ed does not include pension contributions-Pension contributions include FY 2007 GRF appropriated-Health Care includes Public Health and Health Care and Family Services-Administration includes all boards, commissions, agencies, authorities, districts, councils, OMB, Revenue, CMS, Inspector General and all legislative, constitutional and judical offices
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© Center for Tax and Budget Accountability 2007
GRF Expenditures by Category, 1995 - 2006
Category FY 1995 Actual
FY 1995 CPI Adjusted to FY2006 FY 2006 Enacted
$ Difference Between 1995 Adj'd for CPI & 2006 Enacted
FY 1995 ECI Adjusted to FY2006
$ Difference Between 1995 Adj'd for ECI & 2006 Enacted
GRF $17,302.0 $22,613.7 $24,406.4 $1,792.7 $24,776.5 -$370.1
Education $3,656.0 $4,778.4 $6,123.0 $1,344.6 $5,235.4 $887.6
Health Care $4,319.0 $5,644.9 $7,034.0 $1,389.1 $6,184.8 $849.2
Pension $519.0 $678.3 $938.4 $260.1 $743.2 $195.2
GRF without Health Care and Pensions $12,464.0 $16,290.4 $16,434.0 $143.6 $17,848.4 -$1,414.4
GRF without Health Care and Pensions and Education $8,808.0 $11,512.1 $10,311.0 -$1,201.1 $12,613.1 -$2,302.1
**Notes: Health care includes Medicaid and state employee health insurance
Sources: State of Illinois' Traditional Budgetary Financial Reports and Fiscal Focus Illinois' FY2006 Budget National Association of State Budget Officers Comptroller Fiscal Focus, January 1997
CPI and ECI based on Bureau of Labor Statistics
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Comparison of State Retirement System Debt
$29.6
$7.2
$40.9
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
Illinois Ohio National Average
Deb
t ($
in b
illio
ns)
*Ohio Debt and National Average Debt Based on the 2004 Wilshire Report, the latest national data available. At the release of the report, Illinois debt w as $43.1 billion. The current debt of $40.9 billion is based on the Commission on Government Forecasting and Accountability, Report on the 90% Funding Target of Public Act 88-05932004 and the FY 2006 and FY 2007 Pension Holiday.
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Figure 3: 2004 Funded Ratio and Share of Debt of the Five Illinois Retirement Systems [1]
2004 TRS SERS SURS GARS JRS State Total
Funded Ratio 59.7% 51.8% 64.7% 45.1% 38.7% 58.9%
Share of Unfunded Liability (Debt) $23.01 $9.78 $7.29 $0.689 $0.131 $40.9
[1] Ibid – FY 2004 numbers reported by the Illinois Commission on Government Forecasting and Accountability adjusted to cover the impact of the Pension Holiday taken for Fiscal Years 2006 and 2007, under P.A. 94-0004.
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2004 Funded Ratio Comparison of Nation's Public Retirement Systems: National Average vs. Illinois
58.9%
83.0%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
National Average Illinois
Source: Illinois Commission on Government Forecasting and Accountability. Illinois funded ratio is the FY 2006 reported number adjusted to account for the Pension Holidays in FY 2006 and FY 2007. The national average is based on the 2005 Wilshire Report on State Retirement Agencies, the latest national data available.
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Comparable State & Local Government Annual Retirement Benefits
$19,848$17,928 $17,568 $17,112
13,788 12,884
$0
$5,000
$10,000
$15,000
$20,000
$25,000
Avera
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Paym
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© Center for Tax and Budget Accountability 2007
$17,112$16,488
$10,000
$11,000
$12,000
$13,000
$14,000
$15,000
$16,000
$17,000
$18,000
$19,000
$20,000
National Average Illinois
Av
era
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An
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Average State & Local Government Employment Annual Retirement Benefits
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Participants in the Illinois Pension Plans
TRS SURS SERS JRS GARS Total
Active Members 250,540 153,475 89,735 947 265 494,962
Beneficiaries 85,153 41,638 54,678 912 395 182,776
Totals 335,693 195,113 144,413 1,859 6,600 677,738
Percent of Total IL Population 5.3%
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FY07 Normal Costs of the Five Illinois Retirement Systems
Normal CostPercent of
Payroll
JRS $32,200,000 23.47%
GARS $2,400,000 19.42%
SERS $329,000,000 9.17%
SURS $319,584,000 10.82%
TRS $650,835,074 8.20%
Total $1,334,019,074
Total Weighted Average 9.13%
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FY 2006 and 2007 Pension Holiday
$2,117.2
$2,507.8
$938.4
$1,374.7
$0.0
$500.0
$1,000.0
$1,500.0
$2,000.0
$2,500.0
$3,000.0
2006 2007
Amount Owed
Amount Paid
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Required Yearly Pension Payments Post Pension Holiday: FY 2006 - FY 2045
$0
$2,000,000,000
$4,000,000,000
$6,000,000,000
$8,000,000,000
$10,000,000,000
$12,000,000,000
$14,000,000,000
$16,000,000,000
$18,000,000,00020
0620
0720
0820
0920
1020
1120
1220
1320
1420
1520
1620
1720
1820
1920
2020
2120
2220
2320
2420
2520
2620
2720
2820
2920
3020
3120
3220
3320
3420
3520
3620
3720
3820
3920
4020
4120
4220
4320
4420
45
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Because of Illinois constitutional restraints, switching to a defined contribution system does not and cannot reduce the state's current $40.7 billion unfunded liability. The sole way to cover this liability is to design a rational program that does not back load costs like current law.
Defined contribution systems have significantly higher annual administrative costs than fully funded defined benefit systems. If Illinois moved to a defined contribution system for all current participants in the five Illinois state pension systems, that change would cost taxpayers from $275 million to $610 million per year in additional administrative costs.
If contribution rates remained the same, defined contribution systems can be expected to generate significantly lower retirement benefits. For example, when Nebraska switched to a defined contribution system, the average benefit was only $11,230 per year compared to $16,797 per year under the defined benefit system.
Defined Contribution Myths
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Defined Contribution Myths
Defined contribution systems have the advantage of creating fiscal discipline that is absent from a defined benefit system. Due to their construction, defined contribution systems would force the state to make the required employer contribution into the employees account on a per pay period basis, rather than offering promises of future benefits, as under the current defined benefit system. From an employee's perspective, a defined contribution system would have two advantages over a defined benefit system: (i) the benefits would be portable from job to job; and (ii) an employee could access his or her defined contribution account for emergencies pre-retirement (although subject to tax penalties, in certain situations).
The three main disadvantages of a defined contribution system are: (i) reduced and uncertain retirement benefits; (ii) lesser investment returns; and (iii) market risks.
On balance, when funded in a fiscally responsible manner, a defined benefit system permits the public sector to provide its workers with better retirement benefits at lower overall cost to taxpayers.
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$24,000
$29,000
$34,000
$39,000
$44,000
$49,000
$ i
n M
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s
Revenues
Expenditures
The Illinois Structural Deficit(How Revenue Growth will not Keep
Pace with the Cost of Current Services)
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Growth in State Issued Revenue and
General Obligation Bond Debt: 2000-2006
$7.684$8.444
$9.543
$20.812$21.809 $22.241
$22.820
$0.000
$5.000
$10.000
$15.000
$20.000
$25.000
2000 2001 2001 2003 2004 2005 2006
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© Center for Tax and Budget Accountability 2007
• Since 2000, the percentage of general fund revenues going to pay off debt has risen from under 4% to over 7% of total revenues. That means almost $2 billion of all general funds WENT to paying off debt and interest in the last, complete Fiscal Year (2006) instead of going to fund public services.
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General Obligation and State-Issued Revenue Debt
as a Percentage of General Fund Revenues
3.83%4.02%
4.42%4.73%
6.06%
6.40%
7.08%
0%
1%
2%
3%
4%
5%
6%
7%
8%
2000 2001 2002 2003 2004 2005 2006
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Debt Comparisons: Illinois v. Other States
• Illinois has more total debt than only two other states, California and New York.
• In 2004, Moody’s reported Illinois owned 7.5% of the total national debt.
• The National Association of State Budget Officers report that when per capita debt is more than $1,200, as is Illinois, it becomes unmanageable for the state.
• Illinois has more than double debt per capita than the national average.
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Tax-Supported Debt Per Capita:
Illinois Ranks 6th Nationally in Debt Per Capita
which is More Than Double the National Average
$2,019
$999
$0
$500
$1,000
$1,500
$2,000
$2,500
Illinois National Average
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• Illinois also ranks high nationally when comparing tax-supported debt as a percentage of personal income. Again, the state has almost double the national average.
• Moody’s rates Illinois lower than 30 states in its credit rating. Thirteen states rank similar to Illinois and three are given credit ratings lower than Illinois.