SPRINGFIELD, Ill. – Wouldn’t it be great if every time we made a bad investment decision a fairy godmother waved her magic wand and made those bad decisions disappear?
You, Illinois taxpayer, are someone’s fairy godmother.
Even though teacher union representatives control the board that runs the Teachers’ Retirement System, the unions aren’t responsible for making up the difference when the board makes bad investment decisions.
If those investments don’t go well, they expect taxpayers to sprinkle cash like pixie dust and make their problems go away.
This is happening now. The TRS board originally projected an investment return of 8.5 percent for the fiscal year ending June 30, but instead collected a paltry 0.76 percent. For the same period, Standard & Poor’s 500 index grew 7.39 percent and the Dow Jones industrial average grew 7.92 percent.
And this isn’t the first time TRS investment returns have been disappointing. Before this year, the five-year average rate of return was only 4.1 percent, and the 10-year average was 6 percent.
Most of us in the private sector depend on 401(k) plans, IRAs and similar arrangements to fund our retirements.
Such plans are largely self-funded and self-directed. If we invest poorly, we are responsible. If we make smart decisions, we reap the rewards.
In other words, we take personal responsibility for our choices.
Not so with public sector unions.
Even with union members now controlling a majority of seats on the TRS board, they have been unwilling to accept that with power comes responsibility.
They stand by a view – that pensions can never be diminished – no matter what.
Make no mistake, the legislature and a host of governors promised public employees more than the state could afford, and bear much of the responsibility for the current pension crisis. But teacher unions aren’t blameless.
Teachers elect half of the TRS board; the governor appoints the other half. In 2008, Gov. Pat Quinn broke with tradition and appointed an extra union member to the board, giving the two unions majority control. None of these members are directly accountable to Illinois taxpayers.
At times, political influence, rather than financial competence, has dictated how to invest pension money.
The TRS board now claims that they have been asking for too little. Their demand? They would like taxpayers to pony up more cash.
But we can’t keep pouring more money into a faltering system at the expense of core government services – like classroom education.
Comprehensive pension reform should be the first order of business.