SPRINGFIELD -- Illinois’ pension payments will increase by another $290 million next year after the largest state pension system decided to lower the rate of return it expects to get from its investments.

SPRINGFIELD -- Illinois’ pension payments will increase by another $290 million next year after the largest state pension system decided to lower the rate of return it expects to get from its investments.

The Teachers’ Retirement System, which handles pensions for teachers outside of Chicago, lowered its expected rate of return on investments from 8.5 percent to 8 percent.

As a result, the state’s required payment to TRS for the 2014 budget year is expected to increase by another $290 million. It will further strain a state budget where critics say pension costs are crowding out spending for other state services.

TRS hired an actuarial firm to recommend a realistic rate of return for its investments. Investment income is one component used to pay pension costs along with teacher contributions and money paid by the state.

Buck Consultants of Chicago recommended three possible rates of return ranging from 7.75 percent to 8.25 percent. The TRS board of trustees selected a rate of return in the middle.

“Reducing the rate of return is a prudent move that balances reality with the needs of TRS members,” TRS executive director Dick Ingram said in a statement.

A survey by the National Association of State Retirement Administrators released a survey last summer that showed few public retirement systems expect to earn an 8.5 percent return on investments. TRS has used that rate since 1997. The survey of 126 major state and local pension systems found that 47 were assuming an 8 percent rate of return.

TRS said the expected state contribution for the budget year that begins next July 1 will be $3.36 billion. Had the system not changed its expected rate of return, the state contribution would have been $3.07 billion.

Republican legislative leaders seized on the TRS action as further proof that state pensions must be changed.

“Today’s board action underlines the fact that our pension systems’ realities keep getting worse, not better,” said Senate Minority Leader Christine Radogno, R-Lemont and House Minority Leader Tom Cross, R-Oswego, in a joint statement. They also noted that Moody’s Investors Service thinks even an 8 percent return is too optimistic in today’s economic situation.

Gov. Pat Quinn’s budget office issued a statement that the TRS action was anticipated and underscored Quinn’s continued calls for pension reform.

State lawmakers aren’t expected to address pension reform until January at the earliest.

Doug Finke can be reached at (217) 788-1527.