A pension buyout program offered to members in the Illinois' three largest retirement systems has fallen considerably short of anticipated savings in its first year, according to a report.
Buyout savings were expected to reduce the state pension contributions from general operating funds by more than $400 million for the fiscal year that ended June 30.
But an analysis by a budget watchdog, the Civic Federation, shows that the buyouts have only produced around $13 million in general funds savings, which all emanate from the State Employees' Retirement System, the Chicago Tribune reported.
Last year, former Gov. Bruce Rauner included the program in the 2018 Illinois budget without submitting the plan through a pension actuarial assessment or public hearing process.
Jeff Houch, assistant to the executive secretary at SERS, said there were "flaws and inconsistencies" with the benefit payment projection model that was used to determine the plan's financial ramifications.
Houch added the cost of living adjustment buyout program is unique to America's public sector and is "very complicated."
"This is a pretty new idea as far as the public sector," Houch said, noting that Missouri is the only other state that has offered former workers pension buyouts. "Anytime you're at the forefront of a complex plan like that, there's going to be a little trial and error."
A few voluntary buyout plans were offered to participants in SERS, the Teachers' Retirement System and the State Universities Retirement System, giving members instant payouts in exchange for forgoing future benefits. The buyouts were extended to 2024 during the most recent legislative session.
The Teachers' Retirement System created its COLA buyout program in January. But as of mid-June, just 79 of its more than 3,000 retiring members had taken the buyout, which had been estimated to provide $56 million of the $400 million in initial savings, the analysis revealed.
Meanwhile, members of the State Universities Retirement System weren't able to enroll in the buyout program until the beginning of the state's current budget year, which began July 1.
Illinois continues to have the lowest credit rating of any state, partly due to its unfunded pension liabilities, which now total nearly $134 billion. The state can sell up to $1 billion worth of bonds to fund the buyouts.
Gov. J.B. Pritzker's administration was "aware of the likely overestimate" of the savings for the last fiscal year and it was adjusted for in his first proposed budget earlier this year, said spokeswoman Jordan Abudayyeh.