There will be more annuitants collecting from Cook County’s pension fund than there will be employees in 2019, the fund’s executive director told a small group of commissioners on Tuesday. The result is shrinking contributions from employees while payouts to retirees grow along with mounting financial pressure on county coffers and taxpayers.
A chart from the presentation given to commissioners Tuesday from the Cook County Pension Fund.
The Cook County Pension Fund started at a disadvantage. It is the only system in Illinois without legislated actuarial-based funding–a calculation based on the real benefits owed to county employees, the presentation notes. State statute only mandates the county pay based on what’s known as a multiplier: the employee contributions multiplied by a flat rate of 1.54.
That sum falls far short of what is owed to county employees for retirement, survivor, health, disability, and death benefits down the line.
That funding structure led to the county having an unfunded liability of $7.2 billion and a funded ratio of just 56.7% in 2016.
As a solution, the county began making an additional contribution to the fund, using revenues from the 1% hike in the sales tax approved in 2015.
On top of the statutory amount, the county contributed an additional $270 million in FY 2016. The county allocated a $353 million payment in FY 2017, and planned on $353.4 million in FY 2018. The taxpayer-funded contribution will climb to a projected $450.9 million in 2023.
County Chief Financial Officer Ammar Rizki said Tuesday he expects sales tax revenue to match the rate of inflation in the coming years.
Those supplemental amounts are tied to a plan to reach 100% pension funding over 30 years, and are made through one-year intergovernmental agreements between the county and the pension fund.
Those one year agreements are not a good fix in the long-term, Executive Director Nickol Hackett said. Without being able to count on that money beyond the one year IGA, those payments have “little impact” in reducing the fund’s longer term funded status, create “uncertainty in the fund’s long-term investment strategy,” and favor “short-term, liquid, lower return investments to meet benefit needs.”
Only four commissioners were on hand by the end of Hackett’s brief presentation: Pension Committee Chair Bridget Gainer (D-10), John Daley (D-11), Tim Schneider (R-15) and Richard Boykin (D-1).
The system will be stretched even thinner as fewer employees pay in, especially if the county follows through on plans to cut roughly 1,000 positions and layoff more than 400 employees in the 2018 budget.
“If we’re able to have sustained contributions that are legislated and reliable, you’ll see the upward trend of funding,” Hackett said, trending upwards towards 62% in 2025. “That’s just based on actuarial assumptions. We’ve had two strong years in investments, that could be offset at any time by a lag year in investments.”