Look Out Below: Illinois Pension Debt in the Pits
To say Illinois faces a hole in funding its public employee pension systems is like saying the Grand Canyon is an impressive ravine or the Mindanao Trench a good-size gully.
Indeed, “hole” is hardly an appropriate word. “Abyss” and “chasm” come readily to mind, with “bottomless pit” not too far away.
One fact seems indisputable: The commitments Illinois has made to provide retirement security for more than 700,000 downstate teachers, state workers and university employees pose the greatest financial challenge the state ever has faced. Consequently, pension reform is expected to be a key issue during the current spring session of the General Assembly.
The dollars can’t be argued. When the books are closed on the current fiscal year on June 30, legislative analysts project the five retirement systems for which state government is responsible will need roughly $131 billion to cover benefits already earned by public workers, with only $46 billion in expected assets to cover the costs, or about 35 cents on the dollar. The other $85 billion represents the unfunded liability, an obligation the state must meet but for which no funding source exists.
Nor can the state walk away from the commitment, as a private sector employer can do through bankruptcy. The Illinois Constitution guarantees that once earned, pension benefits cannot be diminished or impaired. Even if the state were to abolish its public employee retirement systems today, every covered worker would be entitled to the benefits he or she has earned up to the moment the systems disappeared.
How much is $85 billion? Well, it’s roughly three times last year’s total receipts into the state’s main checkbook account, about $29 billion. Or about $6,600 for each of the 12.9 million folks the U.S. Census Bureau says live here. And it’s eight times greater than the comparable figure of two decades ago, when the state’s unfunded liability was slightly more than $10 billion at the end of fiscal year 1990.
Read more at Illinois Issues
image map of Dante’s Pit of Hell