Good, bad news shared on condition of State Universities Retirement System

On April 7, the first day of the board's two-day meeting, trustees heard
both bad news and hopeful news concerning the condition of the State
Universities Retirement System, which provides retirement benefits for the
faculty and staff of all state universities and community colleges in
Illinois.

The bad news is that the system, and therefore the UI, is "at the bottom of
the barrel" in state-appropriated funding for retirement relative to
programs at other Big Ten institutions, said Craig S. Bazzani, UI vice
president for business and finance.

The overall state system - including SURS and four other systems covering
different groups of state employees - is "one of the dirty dozen" in
underfunding among state pension systems in the United States, said Dennis
D. Spice, SURS executive director.

For SURS, "at the rate we're going, we'll be bankrupt by the year 2020,"
Spice said.

The system has not been adequately funded since its inception more than 50
years ago, Spice said.  The real problems, however, began about a decade
ago when the state government reduced its contribution to far below even
the requirements for people already retired, he said.  What was supposed
to be a one-year cut became a decade-long practice, aided by state budget
crises.

The hopeful news is that two bills have been introduced in Springfield, one
by the governor and one in the House of Representatives, that would phase
in the money needed to eliminate a growing unfunded liability.

"Both plans will work," Spice told trustees, but "one of these plans must
be enacted this year."  Dealing with the issue cannot wait even two more
years, much less five or 10, he said.  "We're slowly taking our principal
to pay benefits."

"I think there really is a serious intention [by the governor and others]
to do something about this," Bazzani said after the April 7 meeting.

Though even a plan that would phase in money over many years would be an
improvement, the best plan would be one that rectifies the underfunding
sooner rather than later, Bazzani said.

"The more they can do, the faster they can do it, the better off we are,"
he said.  If the underfunding continues or additional funding is phased in
over a long period, the danger for the UI and its employees is that the
money needed to fix the problem will be drained from future salary
increases.