REPORT DIGEST

TEACHERS’ RETIREMENT SYSTEM

OF THE STATE OF ILLINOIS

FINANCIAL AUDIT

For the Year Ended:

June 30, 2005

Release Date:

March 1, 2006 

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 is also available on

the worldwide web at

http://www.state.il.us/auditor

SYNOPSIS

•       The unfunded liability of the Teachers’ Retirement System of the State of Illinois (System) was $21,990 million at June 30, 2005.  The System’s funded ratio at that date was 60.8%.

•       Public Act 94-0004 became law on June 1, 2005 and modified the Employee Retirement Option (ERO), changed the member contribution rate, added new employer contributions and established specific dollar amounts to be contributed by the State for fiscal years 2006 and 2007 to the System.

Unfunded liability at June 30, 2005 totals $21,990 million

State contributions will be reduced for fiscal year 2006 and 2007

INTRODUCTION

      This digest covers our financial audit of the System for the year ended June 30, 2005.  A report on the results of our compliance attestation examination for the year ending June 30, 2005 is being issued separately. 

UNDERFUNDING OF THE SYSTEM

      The actuarial accrued liability was valued at $56,075 million at June 30, 2005.  The actuarial value of assets (at fair value) totaled approximately $34,085 million at June 30, 2005.  The difference between the liability and the assets of $21,990 million reflects the unfunded liability of the System at June 30, 2005.  The System had a funded ratio of 60.8% at June 30, 2005.

NEW LEGISLATION AFFECTING THE SYSTEM

     Public Act 94-0004 became law June 1, 2005 and affected the System by modifying the Employee Retirement Option (ERO), changing the member contribution rate and adding new employer contributions.   In addition, the Act also established specific dollar amounts to be contributed by the State for fiscal years 2006 and 2007, as opposed to the State contribution being calculated based on the existing funding formula. 

    The System has calculated the amounts to be contributed by the State for fiscal years 2006 and 2007 to be approximately 50% of what would have been contributed under the existing funding formula.  State contributions for fiscal year 2006 will be reduced $523.9 million and approximately $497.6 million for fiscal year 2007.  State required contributions will be higher in future years to make up for the two-year funding reduction.           

AUDITORS' OPINION

      Our auditors state the June 30, 2005 financial statements of the System are fairly presented.

____________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:RPU:pp

SPECIAL ASSISTANT AUDITORS

      BKD, LLP were our special assistant auditors for this audit.