The largest state-funded pension system said Wednesday it will need a 10 percent increase in its state contribution in next year’s budget.

The Teachers’ Retirement System said the state will have to kick in more than $4.8 billion for the next budget that will start July 1, 2019. That’s an increase of about $400 million from the current budget.

“TRS investments had a good year, but we cannot invest our way out of this problem,” TRS executive director Dick Ingram said in a statement. “The unfunded liability is too large and grows every year.”

Years of underfunding of all five state-funded systems have left the state pension systems in debt to the tune of at least $130 billion. More than $73 billion of that is from TRS. Ingram said paying off that debt accounts for 76 percent of the state’s annual contribution to the teacher retirement fund. Without those costs, the state would only have to pay $1.2 billion in the next budget.

TRS said changes made to TRS during the last fiscal year aggravated the problem. Those changes included the effect of asset smoothing intended to even out large investment gains or losses and a requirement school districts pay more to cover pension costs for staff making more than the governor’s salary.

Ingram said the changes had a $470 million effect on TRS finances "and eroded progress toward financial stability."

At the same time, TRS said its investments produced an 8.45 percent return in the 2018 fiscal year. TRS assumes an investment return of 7 percent a year.

Also Wednesday, TRS said it is finishing up work on two proposals approved by the General Assembly to try to cut teacher pension costs.

One will allow inactive members of TRS to partially cash out their benefits. They will be able to get a lump sum payment of 60 percent of their lifetime retirement benefit in exchange for getting out of the system.

The other will allow teachers in the Tier 1 pension plan to accept a 1.5 percent annual increase in their pension payments rather than the 3 percent increase they get now. In exchange, they will get a lump-sum check that equals 70 percent of the difference in the two amounts.

TRS spokesman Dave Urbanek said the two programs are expected to be available for willing participants in the early part of next year. However, he cautioned that the General Assembly has so far not provided money to make the lump-sum payments for either program.

Contact Doug Finke: doug.finke@sj-r.com, 788-1527, twitter.com/dougfinkesjr.