Illinois lawmakers continue to ignore pension reform so, not surprisingly, Illinoisans are on the hook for billions more in pension debts.
The officially-reported shortfall at Illinois’ five state-run pension funds – for state workers, university employees, judges, lawmakers and teachers outside Chicago – increased to $144 billion in 2020, up $7 billion from the year before, according to a new report by the Commission on Government Forecasting and Accountability.
The growing shortfall continues the long-term trend in Illinois of increasing debts, higher taxes and worsening retirement security for government workers. Residents are paying more into pensions every year only to see the funds’ health stagnate and debts rise.
Here are the three key takeaways from the COGFA report:
- As the government measures things, each Illinois household is on the hook for $30,000 in future taxes to pay down the state’s record $144 billion shortfall. In contrast, Illinois households were on the hook for “just” $3,500 in pension debts in 2000. (The per household numbers only take into account the five state-run funds and are based on official numbers.)
- Illinoisans are burdened with trying to keep afloat the second-worst funded pension plan in the country. Collectively, the plans have only 39% of the money they need on hand today to meet their future payouts to pensioners. Retirement security for government workers has worsened despite increasingly growing contributions by taxpayers.
- Taxpayers contributed a record $9.2 billion from the General Funds budget to pensions in 2020 – a fifth of the state’s budget in 2020. COGFA projections show that a quarter of the state’s budget will continue to be swallowed up by pensions for the next 25 years.
2020 pension details
The collective funded ratio for Illinois’ five state funds fell to 39 percent funded in 2020, down a percentage point from last year and far below the 75 percent funded ratio in 2000. Illinois’ funded ratio is the second worst in the country and a key reason why Illinois has flirted with a junk rating the past few years.
Of the five funds, the State University Retirement System is the healthiest at 41 percent funded. The General Assembly Retirement System, the perennial loser among the five, is less than 17 percent funded. The lawmakers’ pension fund requires a yearly taxpayer bailout worth $20 million just to remain solvent.
In 2020, Illinois taxpayers contributed a record $9.2 billion to the five funds – $700 million more than last year and double the amount compared to a decade ago.
Those growing pension contributions continue to crowd out spending on other vital services in Illinois. The state’s pension costs skyrocketed as a percentage of the state’s budget in 2012 and have remained high ever since.
2020’s contribution consumed more than a fifth of Illinois’ general budget. COGFA estimates that pension costs will grow to a quarter of the budget and remain that high for the next 25 years. No other state in the country consumes more of its budget for pensions.
$144 billion is actually $317 billion
COGFA’s official $144 billion shortfall is based on the government’s rosy assumptions – largely due to overly optimistic investment returns.
The rating agency Moody’s assumes far lower investment returns going forward, resulting in a pension shortfall for Illinois that totals $317 billion in 2020. Moody’s estimate is up $56 billion from 2019, largely due to falling interest rates in 2020.
The agency’s calculations put Illinois’ per household debt at more than $66,000 each. It’s the highest debt burden for state pensions in the country.
Any way you measure it, the burden on Illinoisans is growing.