US- Illinois governor Pat Quinn has proposed to suspend contributions to the state's five retirement systems in an effort to shore up the state's balance sheet.
The $29bn Teachers' Retirement System of the State of Illinois has spoken out against the cuts and is demanding that state pay its contributions, along with the $2.3bn in funding cuts in 2006 and 2007.
Executive director Jon Bauman said: "These amounts must be repaid to the retirement systems with interest. If $1.3 billion is cut from TRS during fiscal year 2010, it will cost the state $5.8 billion over the 35 years remaining in the statutory funding plan."
He added that the state's pension debt of $73bn is more a result of insufficient state funding than of overly generous benefits.
In a budget address Quinn said: While we root out waste and inefficiency, we must fix another enormous problem. That's our giant under-funded public pension systems."
Combined, the five state systems are only 54.3% funded.
Quinn continued: "For thirty years, these systems have been allowed to spin out of control. Without bold reform, the pension system will go bust."
The Governor is also calling for state employees to increase their pension contributions by 2% and said he would consider issuing pension obligation bonds "if market conditions are favourable," read the state budget release yesterday. The state last issued pensions obligation bonds in 2003 when it issued $10bn at a 5.05% rate.
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