Illinois' teacher pension managers expected 8 percent returns just a few years ago. They lowered that to 7.5 percent. Now they're looking to lower it again.

The revelation that Illinois' public pension systems will once again miss their mark on investments shouldn't be a surprise.

Ivan Osorio, editorial director at the Competitive Enterprise Institute, said pension managers should expect investment returns closer to 3 percent.

Osorio said they don't because of the perverse nature of defined-benefit, taxpayer-guaranteed pensions.

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"Taxpayers will pick up the bill," Osorio said. "But the key here is that it's future taxpayers. Politicians who make these (pension) promises, by the time they come due, they're going to be out of office."

Osorio said pension managers in Illinois and other states need to get real with not just investment returns, but with investment risk and life expectancies for the people who'll collect

"There's no easy fix," Osorio said. "But the first thing to do is stop digging. At least once you do that you can freeze the problem."

Osorio said such reforms could include a greater emphasis on moving new hires into defined-contribution pension plans, where taxpayers wouldn't be on the hook to make up for poor investment returns.

Osorio said states need to stop putting taxpayers on the hook for billions of dollars in future costs. He also said pensions systems are going to have to look at reforms, including bringing an end to defined benefit pensions that are so wildly out of balance.


(Copyright WBGZ /