SEC Illinois Pension Fund Probe Confirmed, WSJ Reports

On Monday night, the Illinois state governor's office confirmed that the Securities and Exchange Commission has launched an investigation into public officials' statements concerning the state's chronically underfunded pension fund -- which faces one of the biggest shortfalls in the nation.

The Wall Street Journal reported that the inquiry is focussed on "public statements concerning an overhaul measure passed in 2010 meant to help shore up the retirement system." According to the governor's spokeswoman, the governor's office is fully cooperating with the inquiry.

The WSJ details what the investigation will be looking at:

"An issue being examined is whether Illinois was taking future savings and treating them as current reductions in the cost of the pension fund, said Robert Kurtter, a managing director in the public finance division at Moody's Investors Service, who said his firm spoke with Illinois officials about the inquiry. One of the measures that Illinois took to save costs was to raise the retirement age for newly hired Illinois workers."

Illinois now joins the ranks of states targeted by the SEC for financial disclosures related to pensions.

Last August, in the SEC's first ever action against a state, the federal regulators accused New Jersey of securities fraud for claiming it had been properly funding the public pension fund.

In October, the SEC accused four former San Diego officials of failing to disclose the size of pension-fund shortfalls when the city sold bonds.

Last year, the SEC announced a special unit for investigating state pension fund disclosures, and more such investigations may be on the way.

Meanwhile, states are growing increasingly desperate as they confront massive debts and diminished revenue. According to two finance professors' estimate, states face a combined pension fund shortfall of $3 trillion, and some state are even seeking paths towards declaring bankruptcy.

Comments

[alterego55]

11:50 AM on 01/27/2011

When are they going to investigate California pensions?

[Lpeter]

08:14 AM on 01/27/2011

Well it is time for SEC to get more help. They are under staffed and these cases are huge and costly to the public.

We are in for a new reality. Not a pretty one.

[VictoriaP]

06:19 AM on 01/27/2011

i wrote about pension and municipal government looting a couple of years ago. do a search for "retirement pensions" on this page: http://tinyurl.com/4hoqdyr and read the paragraph beginning with: What precisely is the reason...

[VictoriaP]

06:09 AM on 01/27/2011

public pension chief investment officers make hundreds of thousands in salary and also are paid bonuses. these are public sector employees. the so called rationalization for this compensation structure is that this is the only way to attract the best and brightest who would otherwise rather work on wall street. WTF?

chief investment officers employed by the various public sectors were all involved in the fleecing of these public funds. there was so much money changing hands it was ridiculous­. imagine that you are the person who single handedly gets to direct billions of dollars of investment to wall street banksters. you don't think that there is a payoff for this? i want to see state attorneys general start criminal investigat­ions of the public fund managers. they are the ones who handed over the money to the crooks.

[corwin]

08:06 AM on 01/27/2011

Diffidently, I have to correct you again.These are people who are reimbursed for their services as professional managers They are no more public sector employees than a doctor who receives az check from the state for delivering a baby and receiving a state backed cheque.Now,it's true,especially in Illinois, the managers,are overpaid , the funds are doing badly and in some cases I believe mgrs make bonuses for breathing.Still,they are Dems , and it's not as if they have actual expertise.What do you expect of them?
COuld I suggest a modest solution to Illinois' implosion? If it were possible to tax people who have left Illinois with a form of 'escape tax' ,that might be substantial.Of course, 94 and the Skyway would have to be blocked.And ,maybe an IQ tax.Stzart at 100 pints -you'd not get many Dem voters.And,as the IQ rises,the tax can rise,and obviously the percentage of Democratic voters would fall. The monies from this could be used for educational purposes. Say,the recipient could get another MSW or somethibng

[VictoriaP]

08:41 AM on 01/27/2011

I HAVE NO FRICKING IDEA WHAT YOU ARE BLATHERING ABOUT, ESPECIALLY YOUR ILLINOIS RANT!!

would you please get your facts straight. do a bit of research before you start to spout off. i have no problem being corrected but geez, what crawled up yours?

YOU are clearly referring to the managers on the financial services side of the transaction. I AM SPECIFICALLY REFERRING TO THE to the chief investment officers that ARE public employees, like this one: http://tinyurl.com/4f5kzvj

Joseph A. Dear
Photo of Joseph A. Dear

Chief Investment Officer

Joseph A. Dear is the Chief Investment Officer of the California Public Employees’ Retirement System (CalPERS).

in case you need to read more:http://tinyurl.com/4z8olzj
Why Choose CalPERS?

A Different Kind of State Employer
People are drawn to work at CalPERS for a variety of reasons. For some, it's about personal job satisfaction. Working to assist active and retired public employees and their families can be an extremely rewarding experience. Others find the variety of work and the opportunities for career growth and development appealing. Many people find the culture of CalPERS attractive because of our commitment to provide training and development opportunities. Others are attracted to our inclusive atmosphere and emphasis on communication at all levels.

[ranthny]

03:48 AM on 01/27/2011

Hmm. I wonder if the teabaggers on pensions realize they are benefiting from a socialist system?

[48thGuy]

06:46 AM on 01/27/2011

No, most of the are way too preoccupied with their rantings on socialized medicine.

[marinatha]

12:05 AM on 01/27/2011

Surprise! This will a start of a long list of such funds.I know laws have been put in place to avoid such thing occuring again and again.But where and how do they expect fund to be supplied in times like these? Like this country would never ever have a downturn since the depression again in its histroy.Yea dream on..

[sueinmn]

07:54 AM on 01/26/2011

Pension funds collected and spent for other reasons should be fraud in itself and the masters should pay for the crimes committed.
If I as an employer withheld your annuities, spent it on things of my choice, I would be held accountable for fraud. Why are not state managers not held accountable at the same levels as private people?

[SamEasy]

10:15 PM on 01/25/2011

The SEC......my dead grandmother has more substancial teeth than this phoney entity.

[altohone]

09:10 PM on 01/25/2011

So they are investigating statements about reform instead of the criminal negligence, misappropriation of funds, and kickback schemes that created the problem?

[buckfalcon]

06:25 PM on 01/25/2011

Pensions are an ancient idea whose time has long past. If you depending on any sort of a pension, you are in the riskiest financial situation I can think.

[sueinmn]

07:56 AM on 01/26/2011

So a retiement savings is a bad thing? SS is a bad thing as they say also. Are we back to burying tin cans in our yards? Simply people must be held accountable for their actions. The money masters cannot remain holding the keys to the safe any longer as they are all criminals.

[jimmijo62]

05:53 PM on 01/25/2011

26 yr Illinois employee here-scared to death of the future-just to inform the uninformed-and I'm sure I'll be flamed for it!-we do not pay into social security so this is all we've got to look forwad to.

[sueinmn]

07:58 AM on 01/26/2011

No one has a secure future with the present day criminals running the system.

[corwin]

08:11 AM on 01/26/2011

Huffpo-A conspiracy for everyone

[PenGoddess]

01:24 PM on 01/26/2011

The state is required by the Constitution to pay retirement pay. It would take a constitutional amendment (or a new constitution) to change that. So, the government is legally bound to pay so they will have to come up with the money somehow. However, they are talking about lowering or eliminating the retiree's healthcare benefits.

[dan-o]

10:36 PM on 01/26/2011

A state bankruptcy filing would destroy those pension plans the same way pension plans of millions of private sector workers have been destroyed. I truly think this was planned from the beginning to start in the private sector and then move onto the public sector. A constitutional amendment for the various states may be needed but why do you think the public is being whipped up into a fury about the evil government workers who are ruining our nation with their bloated benefits and retirement.

Public sector workers take note- they really are comming after you!

[ComputerBlue]

04:15 PM on 01/25/2011

Now we're getting to the real bottom of this issue. There are many state and municipal pension funds that are in financial jeopardy because they were underfunded. And they were underfunded because they were valued against the market so as to avoid the actuarial contributions. Hopefully, when this is over we'll unmask the true reason for these pensions being near financial ruin. Illinois, New Jersey, and San Diego will just be the tip of this iceberg, because there are a whole lot of devils here.

[VictoriaP]

06:06 AM on 01/27/2011

the chief investment officers employed by the various public sector were all involved in the fleecing of these funds. there was so much money changing hands it was ridiculous. imagine that you are the person who single handedly gets to direct billions of dollars of investment to wall street banksters. you don't think that there is a payoff for this? i want to see state attorneys general start criminal investigations of the public fund managers. they are the ones who handed over the money to the crooks.

[Figerre]

03:29 PM on 01/25/2011

It isn't that the pension plans are choking the states, it is that the states have already ROBBED the pension plans or lost money in the 2008 crash, and now they are blaming the pensions. Trying to rob Peter to pay Paul -- you can't have already ROBBED Peter AND Paul and expect to wiggle your way out of it.

[Harpro208]

06:26 PM on 01/25/2011

F and F 115

[sickupandfed]

02:27 PM on 01/27/2011

'Nuff said.

[Linda from Deerfield]

02:42 PM on 01/25/2011

Illinois' underfunding of the state pension fund may be one of the biggest, but it is certainly not the only big one. I learned of the issue several years before the economy melted down in a business magazine article that named a lot of states and in many cases the only thing that made some states' problem smaller looked like their smaller population and economy. It was apparently the popular thing to do, under both Republican and Democratic state control.

That was followed by similar articles naming a lot of large corporations that seriously underfunded their pension obligations. Given that the meltdown probably hurt them as much as it hurt the state funds, I would like to see those reports updated, but for some reason, the corporations have been escaping that kind of scrutiny lately.

[jorie]

12:06 PM on 01/25/2011

illinois is scr-wed because of ridiculous democratic policy. the pension plans will be the demise of the state if they don't get their act together. And we all know who will pick up the costs to pay these outrageous pensions. the federal government which means you and I

[benfunks]

02:02 PM on 01/25/2011

The policies go back to republicans as well. All politicians have ignored this problem and made it worse for 15 years.

[woody7]

02:07 PM on 01/25/2011

same here in CA, blame the 'unions" not the politicians from both sides. I pay 10% into my pension, and will probably retire at 25-30% of what I make now, not the big numbers floated in the news.

[spriddler]

10:23 AM on 01/26/2011

The problem is its just too late to get our act together. Our pension fund has assets of around $50 billion. We are paying out over $6 billion net of contributions and that dollar amount is going up rapidly every year. Barring 20% returns for the fund we will quickly draw it down to $0. Anything less than a $100 billion infusion is a bandaid that just lets us kick the can a little further. Considering that with the tax increases the state is only going to pull in a little over $30 billion there is simply no way that we can right the pension fund without a massive federal bailout. Absent that bailout we will in effect be bankrupt within the next decade.