Taxpayer contributions to SURS increased 333 percent since 1998

Employee contributions to the State University Retirement System, or SURS, have gone up by 16 percent since 1998. During the same time period, taxpayer contributions to university worker retirements increased by 333 percent. In 2012 alone, Illinois taxpayers contributed $730 million more to SURS than university employees did. And the disparity between taxpayer and employee...

Employee contributions to the State University Retirement System, or SURS, have gone up by 16 percent since 1998.

During the same time period, taxpayer contributions to university worker retirements increased by 333 percent.

In 2012 alone, Illinois taxpayers contributed $730 million more to SURS than university employees did.

And the disparity between taxpayer and employee contributions is projected to get worse. Between 2013 and 2045, taxpayers can expect their annual contribution to SURS to increase by 132 percent, to $3.2 billion. Employee contributions, on the other hand, will rise 149 percent, to only $710 million. The increase in taxpayer contributions occurs because taxpayers, and not the employees, are required to pay for any shortfalls in the pension system.

These shortfalls are largely a function of the pension system’s defined benefit structure. Defined benefit systems are chronically underfunded due to poor investment returns, changed actuarial assumptions, overly generous benefits and structural underpayments.

For example, taxpayers have to make up the difference when the fund’s investment returns are lower than projected. From 1996 to 2012, missed investment targets added $3.9 billion to the retirement system’s shortfall, according to the Commission on Government Forecasting and Accountability.

State employees, however, continue to pay a constant percentage of their payroll to the pension system, regardless of shortfalls or growing liabilities. This situation creates the massive disparity between employee and taxpayer contributions.

Ultimately, politicians have proven they can’t manage defined benefit systems.

Illinois must move away from defined benefit plans and embrace 401(k)-style plans if it wants to avoid a fiscal disaster. SURS already uses a similar plan for 17,500 of its employees. A defined contribution plan, such as the ones found in House Bill 3303 and Senate Bill 2026, does just that.