Pension costs for state government workers reached an all-time high in 2016, consuming 25 percent of the state’s general budget.1 Today, more than $8 billion of the state’s yearly $32 billion budget goes to pay for pension costs, sapping tremendous amounts of money from social services for the developmentally disabled, grants for low-income college students, and aid to home...View Report
Nearly 38 percent of Illinois Teachers Retirement System assets are in so-called alternative investments.
Illinois’ teacher pension system is structured to allow local school boards to agree to generous contracts, knowing taxpayers across the state will foot the bill. This system should change so that local school boards cover their own pension costs. That way, they will bear the full cost of salary increases they decide on, rather than pushing much of that cost onto unaware state taxpayers.
Illinois crafted the solution to its pension crisis nearly 20 years ago. The problem is many lawmakers don’t even know that solution exists. Since 1998, more than 20,000 state university workers have opted into a 401(k)-style plan instead of the traditional pension plan. Illinois’ lawmakers can begin to solve the pension crisis by simply expanding the State Universities Retirement System’s 401(k)-style plan to all state workers.
In 2010, the unfunded debt related to pensions and retiree health care costs for local and state government workers across Illinois was $203 billion, the equivalent of more than $43,000 per household. In just six years, the total debt Illinois households are on the hook for has jumped to $56,000, or 31 percent. That’s a $13,000 increase for each household. Total unfunded debt for state and local governments in Illinois now totals $267 billion.
More than 50 percent of the state’s $4.1 billion budget for public universities is spent on retirement costs alone.
A golden rule of finance is this: Debt that can’t be paid won’t be paid.
The head of the Illinois Municipal Retirement Fund, or IMRF, has dismissed calls for pension reform, disregarding the fact that pensions aren’t manageable, benefits aren’t affordable, and previous “reforms” propped up pensions on the backs of new workers.
Illinois households are now on the hook for $27,000, up 17 percent from 2015.
The ratings agency cited the city’s “considerable growth” in pension debt in its Oct. 28 downgrade to A3 from A1.
Former Gov. Jim Edgar’s pension compromise with House Speaker Mike Madigan in the 1990s set the state’s pension funds down an unsustainable road.