2018: Doomsday for Illinois Pensions?
A study finds that the Illinois pension system will be out of money by 2018.
Illinois’s pensions are in bad shape with a staggering $83 billion in unfunded liabilities, but a working paper from Northwestern University’s Joshua Rauh finds that the state’s three main pension systems will run dry by fiscal year 2018. That’s the worst in the nation, although seven states will run out of money by 2020. You can read the full study here, along with a power point summary here.
What happens after the pension systems run dry? Good question. According to Rauh, for the five years following 2018, the annual pension benefit payment will average $13.6 billion (including projections of future benefits for existing workers). That’s roughly one-third of projected revenues during those years. The state’s increasing pension burden will continue to squeeze spending on core government programs.
In developing his calculations, Rauh starts with September 2009 asset levels, assumes 8 percent investment returns, and assumes that contributions and newly accrued benefits offset each other.
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