Treasurer Giannoulias: Pay Down Pension Debt
HB 5088 passes out of House Committee today

March 12, 2008

Illinois State Treasurer Alexi Giannoulias wants to commit all revenues generated by his office’s
unclaimed property division toward paying down the state’s $42 billion unfunded pension liability.

Giannoulias’ bill (HB 5088) that would result in additional funds to reduce the pension liability was
approved today by lawmakers in Illinois House Judiciary Committee by a 10 to 3 vote.

Currently, unclaimed property money from the Treasurer’s Office offsets the state’s annual pension
contribution that comes from general revenue and other sources.

Beginning with state fiscal year 2010, Giannoulias wants the unclaimed property money to
supplement, not supplant, what the General Assembly contributes to paying down the unfunded
pension liability.

“Instead of allocating what they pledged, policy makers currently use the unclaimed property
money to replace a portion of the funds they’ve committed,” Giannoulias said. “We want our funds
to add to what the state is contributing so the unfunded pension liability gets paid down more
quickly.”

Last year, the Treasurer’s Office transferred a record $333 million to the state, but only $187 million was
used for pension purposes. The state held onto the extra $146 million windfall to offset its
scheduled pension payment for this year.

Noting that Illinois has the largest unfunded pension liability of any state in the nation, State Sen.
Deanna Demuzio (D-Carlinville) and State Rep. Robert Molaro (D-Chicago) are supporting
Giannoulias’ efforts.

“We need to keep up our end of the deal and target these resources to help alleviate the state’s
suffocating, unfunded pension liability,” said Demuzio, the bill’s sponsor in the Illinois Senate

Molaro, who is sponsoring the legislation in the Illinois House, believes requiring the state to abide
by Giannoulias’ initiative would demonstrate a commitment by the state to reduce its pension debt.

“Everybody complains that we aren’t doing enough to pay down the unfunded pension liability; this
is our chance to pay it down more quickly.” Molaro said. “Whatever comes out of unclaimed
property should go free and clear to pension liability.”

Since 2000, the median transfer of unclaimed property funds has been $88.5 million. If the
Treasurer’s Office puts $88.5 million toward the liability each year through 2045, the office will
have paid down $3.2 billion in pension debt.

“That $3.2 billion is worth much more if you think about how much it would cost the state if that
money was not used,” said Giannoulias, noting that by not making the $3.2 billion unclaimed
property contribution, the state will accumulate $20 billion in debt, or the equivalent of $3.2 billion
plus 8.5 percent interest compounded annually.

Illinois law requires the pension funds to be 90 percent funded by 2045. In Fiscal Year 2007, the
aggregate funding ratio of the five state-funded systems was 63 percent.

The Treasurer’s Office retains all funds received under the Unclaimed Property Act in a trust fund.
On April 15 and October 15 of each year, the Treasurer’s Office deposits any money in excess of
$2.5 million into the state’s pension’s fund.

This legislation would also let the Treasurer’s office deposit that money more frequently, instead of
only twice a year.

“By transferring those excess funds at my discretion, the state’s retirement systems can use the
money to maximize returns on investments and reduce their unfunded liabilities at a faster pace,”
Giannoulias said.

Past transfers from unclaimed property to the pensions fund are as follows:

FY 00 $80.2 million
FY 01 $84.3 million
FY 02 $83 million
FY 03 $89 million
FY 04 $114 million
FY 05 $88.6 million
FY 06 $119.6 million
FY 07 $333 million