REPORT DIGEST

JUDGES’
RETIREMENT SYSTEM

OF ILLINOIS

FINANCIAL AUDIT

For the Year Ended:

June 30, 2006

Release Date:

March 27, 2007

State of Illinois

Office of the Auditor General

WILLIAM G. HOLLAND

AUDITOR GENERAL

To obtain a copy of the Report contact:

Office of the Auditor General

Iles Park Plaza

740 E. Ash Street

Springfield, IL 62703

(217) 782-6046 or TTY (888) 261-2887

This Report Digest and the Full Report are also available on

the worldwide web at

http://www.auditor.illinois.gov

SYNOPSIS

¨ The unfunded liability of the Judges’ Retirement System of the State of Illinois (System) was $692.2 million at June 30, 2006. The System’s funded ratio at that date was 46.4%.

¨ Public Act 94-0004 (Act) became law on June 1, 2005 and established specific dollar amounts to be contributed to the System by the State for fiscal years 2006 and 2007. In addition, the Act requires all new benefit increases to be fully funded by an identified funding source. The Act went on to set expiration periods for all new benefits if not reauthorized by law.

{Financial data is summarized on the reverse page}

JUDGES’ RETIREMENT SYSTEM OF ILLINOIS

FINANCIAL AUDIT

FOR THE YEAR ENDED JUNE 30, 2006

OPERATING STATEMENT ANALYSIS	FY 2006	FY 2005
REVENUES: Contributions - Participants.............................. Contributions – Employer / Appropriations........ Total Contributions........................................ Investment Income - Appreciation in Fair Value. Investment Income – Net Investments Income.. Interest Earned on Cash Balances..................... Total Revenues.............................................. EXPENSES: Benefits........................................................... Refunds............................................................ Administrative Expenses..................................... Total Expenses............................................... Revenue Over Expenses....................................	$ 13,833,096 29,337,911 $ 43,171,007 46,320,241 14,434,078 575,354 $104,500,680 $ 68,997,103 821,637 447,238 $ 70,265,978 $ 34,234,702	$13,268,530 32,043,009 $45,311,539 38,466,043 12,111,036 271,889 $96,160,507 $64,539,560 740,497 460,826 $65,740,883 $30,419,624
INVESTMENT SUMMARY – (All investments held in the Illinois State Board of Investment commingled fund at fair value)	JUNE 30, 2006	JUNE 30, 2005
Government and Agency Obligations........................................ Foreign Obligations.................................................................. Corporate Obligations.............................................................. Convertible Bonds................................................................... Common Stock & Equity Funds............................................... Preferred Stock....................................................................... Foreign Equity Securities.......................................................... Hedge Funds........................................................................... Real Estate Investments.......................................................... Private Equity.......................................................................... Money Market Instruments...................................................... Forward Foreign Currency Contracts...................................... Total Investment Portfolio................................................... Investments Owned by Other Retirement Systems, SERS & GARS...................................................... Judges’ Retirement System Investments...............................	$ 1,110,919,988 104,455,671 1,382,574,163 0 5,369,124,032 1,057,334 1,113,268,102 416,462,183 1,134,025,154 482,264,036 320,641,552 26,145 $11,434,818,360 (10,852,213,970) $ 582,604,390	$ 1,130,079,107 88,970,486 1,643,935,794 1,404,244 5,529,033,328 1,593,391 1,035,874,373 0 778,951,123 466,871,030 283,461,008 (497,874) $ 10,959,676,010 (10,409,325,939) $ 550,087,385
ADMINISTRATIVE EXPENSES	FY 2006	FY 2005
Personal Services..................................................................... Retirement, Insurance & Social Security................................... Contractual Services................................................................ Electronic Data Processing....................................................... Printing.................................................................................... Telecommunication.................................................................. Travel...................................................................................... Commodities........................................................................... Provision for Depreciation........................................................ Change in Accrued Compensated Absences............................. Total Administrative Expenses.........................................	$258,869 91,636 80,852 7,354 3,463 2,165 9,628 606 1,292 (8,627) $447,238	$246,258 105,739 82,017 10,631 3,587 2,168 7,868 647 1,154 757 $460,826
FUNDING PROGRESS	JUNE 30, 2006	JUNE 30, 2005
Actuarial Accrued Liability......................................................... Actuarial Value of Assets........................................................... Unfunded Actuarial Accrued Liability......................................... Funded Ratio.............................................................................	$1,291,394,861 599,234,149 $ 692,160,712 46.4%	$1,236,512,156 564,999,447 $ 671,512,709 45.7%
EXECUTIVE SECRETARY
During Engagement Period: Robert Knox (until May 31, 2006); Tim Blair, Acting (beginning June 2006) Currently: Tim Blair, Acting

Unfunded liability at June 30, 2006 totals $ 692.2 million

State contributions will be reduced for fiscal year 2007 as a result of Public Act 94-0004

INTRODUCTION

This digest covers our financial audit of the Judges’ Retirement System of Illinois (System) for the year ended June 30, 2006. A report on the results of our compliance attestation examination for the year ending June 30, 2006 is being issued separately.

UNDERFUNDING OF THE SYSTEM

The actuarial accrued liability was valued at $1,291.4 million at June 30, 2006. The actuarial value of assets (at fair value) totaled approximately $599.2 million at June 30, 2006. The difference between the liability and the assets of $692.2 million reflects the unfunded liability of the System at June 30, 2006. The System had a funded ratio of 46.4% at June 30, 2006.

LEGISLATION AFFECTING THE SYSTEM

Public Act 94-0004 (Act) became law June 1, 2005 and established specific dollar amounts to be contributed to the System by the State for fiscal years 2006 and 2007 as opposed to the State contribution being calculated based on the existing funding formula. In addition, the Act requires all new benefit increases to be fully funded by an identified funding source. The Act went on to set expiration periods for all new benefits if not reauthorized by law.

The System has calculated that State contributions will be reduced approximately $9.3 million for fiscal year 2007 as compared to what would have been required under the funding formula. State required contributions will be higher in future years to make up for the two-year funding reduction, as the overall goal of 90% funding in fiscal year 2045 was unchanged by the Act.

AUDITORS' OPINION

Our auditors state the June 30, 2006 financial statements of the System are fairly presented.

____________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:RPU:pp

SPECIAL ASSISTANT AUDITORS

McGladrey & Pullen LLP were our special assistant auditors for this audit.

SYNOPSIS

FOR THE YEAR ENDED JUNE 30, 2006

FUNDING PROGRESS

JUNE 30, 2006

JUNE 30, 2005

EXECUTIVE SECRETARY

UNDERFUNDING OF THE SYSTEM

LEGISLATION AFFECTING THE SYSTEM