Officials from Cook County’s Pension Fund presented an abbreviated version of their most recent actuarial findings to commissioners at Wednesday’s board meeting, and painted an unsurprisingly bleak picture. The fund faces similar problems to many other municipalities: fewer employees signing up and more retirees collecting benefits, lower than anticipated returns on investments, and the cannibalization of assets to pay beneficiaries. The pension fund currently has more than 40,000 members and is headed for insolvency by 2039.

Even though commissioners approved a one year agreement to contribute $270 million in sales tax revenue to the pension fund, that extra contribution is going straight to paying benefits, the fund’s Executive Director & Chief Investment Officer Nickol Hackett said. “Those proceeds are going right to work,” Hackett said. “It allows the fund to adhere to our long term investment strategy” rather than liquidating assets to make payments.  

Commissioner Bridget Gainer, the chair of the Pension Committee, pointed out Hackett’s statement assumes the sales tax contribution continues into the future, and suggested a longer-term IGA might give the fund more certainty for future investment moves.

During budget negotiations, Gainer pushed for a longer intergovernmental agreement between the county and the fund, so future boards couldn’t redirect sales tax revenue elsewhere and leave the fund in the lurch.

The FY16 county budget did project extra contributions of sales tax revenue for the next 30 years. A $340 million contribution is projected FY2017, with annual contributions projected to grow at no more than 2% per year until 100% funding is reached in 2046.

While actuarial assets have trended upward, the unfunded liability is growing. In 2015, its funded ratio fell from 57.51% to 55.39%.

“We have a fundamental problem: the investment return has not met the actuarial assumption for a really long time,” County Chief Financial Officer Ivan Samsteinsaid, which will affect funding required year to year. But Samstein did point out what he viewed as the good news–that the three major credit rating agencies recently revised the county’s general obligation bond outlook to stable, citing the county’s effort to address pension funding problems.

While true, ratings agencies warned that the County might have a difficult time building up strong enough reserves to weather another recession. Standard and Poor’s actually downgraded the County to AA- when issuing its “stable” forecast. S&P Global Ratings credit analyst Helen Samuelson said the fact that Cook County shares a tax base with the City of Chicago and Chicago Public Schools, which are both facing funding and pension problems, "could impose practical limitations to the county's revenue and expenditure flexibility.”

But Samstein still said the pension fund is on the upswing. “They are beating the median. They are above average for comparable pension funds,” he said, crediting Hackett’s leadership for the turnaround.

Commissioner Gainer deferred the item, saying there would be another discussion once commissioners had a chance to assess the 14 page presentation and return with questions.

The pension fund hasn’t yet released its full audited financial statements or actuarial valuations for FY2015, which were presented to pension fund board members on June 2. A broader picture of the county’s fiscal position, the Comprehensive Annual Financial Report (CAFR), was released at about this time last year.