The extent of the impact of Illinois pension funds on the recent banking turmoil is unclear | Granite City News
It’s unclear how significant recent bank failures are to various pension funds in Illinois, but a lawmaker is sounding the alarm that the state is one deep recession away from insolvency.
On Sunday, the federal government took control of New York Signature Bank. A few days before, Silicon Valley Bank had collapsed. While President Joe Biden announced depositors would be cured, he said investors would lose.
Among several pension funds that received a message to comment on the liabilities of troubled banks, the Illinois Municipal Retirement Fund said it was hit with about $3 million from SVB.
“While we are still concerned about losses, for context, the IMRF holds approximately $49 billion in assets,” said John Krupa, IMRF’s chief communications officer. “So those stocks are a very small part of our total portfolio – about 0.006% (a fraction of a percent).”
The IMRF is the statewide non-fire and police municipal employee retirement fund. The fund said members, local governments and taxpayers should know the fund is strong.
“We are about 98% funded, which makes us one of the best-funded public pension plans in the country,” Krupa said. “Any potential loss associated with SVB Financial Group will have no impact on IMRF’s ability to pay benefits. We will continue to monitor the situation closely and adjust in accordance with our investment policies.
The Illinois Police Officers’ Retirement Investment Fund said it had little exposure to turbulence from SVB, Signature Bank and Silvergate.
“[A]On February 28, 2023, our exposure to SVB Financial Group, Signature Bank and Silvergate Capital Corp was minimal,” said CIO Kent Custer. “Totalling $1.2 million, the investments represented 0.014% of IPOPIF’s total asset value of $8.9 billion.”
Illinois State Rep. Steven Reick, R-Woodstock, said while recent U.S. banking troubles could “hit” pensions, what’s happening in Europe could be the “real canary in the mine.” of coal”.
“When the Saudis withdraw their funding from Credit Suisse, how many other European banks have similar deals with these oil-producing countries, and if they withdraw their funding for whatever reason, we’re going to have a European banking crisis and that’s going to happen. translate over here,” Reick told The Center Square. “That’s the biggest deal.”
The House Personnel and Pensions Committee heard testimony from various union representatives and government officials regarding pensions. Some were looking to increase the cost of living allowance for pensioners, others were looking to fix problems they say exist for Tier II pensions, which offer fewer benefits than Tier I for employees public hired before 2011.
State Representative Stephanie Kifowit, D-Oswego, chairs the committee. She said they listened to everyone.
“So for fiscal stability in the state of Illinois, that’s an issue that I’m committed to making sure we have appropriate and strong policy to address this issue,” Kifowit said.
Reick said Illinois is “walking on eggshells” with approximately $140 billion in unfunded liabilities for public funds. Something drastic needs to be done, he said, like Congress extending state bankruptcy. This would override the pension protection clause of the Illinois Constitution, Reick said.
“There are only three ways to solve our retirement problems, it will be an increase in income, a reduction in benefits or a complete collapse of the system,” Reick said.
If nothing is done but bring in more taxpayer money, Reick said the state won’t be able to continue providing essential services because nearly a quarter of every tax dollar collected goes retirement costs.
Reick said there must be a “big market” to settle Illinois’ unfunded pension liabilities, which are among the worst in the nation. He suggests that before the bottom hits, there must be a combination of benefit cuts and revenue increases.