Illinois pension debt grows $2.6 billion in 2023, mainly to cover raises
Unfunded liabilities for Illinois’ five statewide pension systems grew by $2.5 billion in a year, hitting its second-highest level since 2009. Researchers attributed most of the growth to “larger than expected salary increases.”
Illinois’ state pension debt grew by $2.6 billion between fiscal years 2022 and 2023, spurred primarily by “larger than expected salary increases” for state employees.
A new pension report from the state legislature’s Commission on Government Forecasting and Accountability shows statewide pension debt rose by 1.8% to $142.3 billion, based on the market value of the assets.
After growing for the second consecutive year, pension debt for the five statewide systems now sits at the second-highest level in the past 20 years. Federal pandemic funding allowed the state to temporarily arrest the deepening debt, but it is again growing.
Researchers attributed the rapid rise in pension debt to “larger than expected salary increases in all five systems.”
Pay raises for state employees in FY 2023 increased the unfunded liability by a total of $1.074 billion, with members of the three largest systems – the Teachers’ Retirement System, State Employees’ Retirement System and State Universities Retirement System – spurring most of the growth.
Another $767.6 million in new debt was attributed to “demographic and other miscellaneous changes.” This includes differences between the predicted and actual benefits paid to employees as well as refunds.
The report shows Illinois has about 44 cents saved for every dollar of benefits promised to members of the five statewide pension systems. Experts warn pensions with funding ratios below 60% are deeply troubled and plans with funding ratios below 40% are likely to be past the point of no return.
Illinois is home to the nation’s worst pension crisis. Chicago alone faces more pension debt than 44 states. State and local pension debt cost each Illinois household roughly $26,533 between 2002 and 2021.
Illinois households are paying the third-most in the U.S. for state pension debt. An Equable Institute study of 225 statewide pension systems’ market returns in 2023 found three of Illinois’ five state-run retirement systems were among the 10 worst-funded systems nationwide.
Only structural pension reforms enabled through a constitutional amendment can truly turn state finances around. A “hold harmless” pension reform plan such as one originally developed by the Illinois Policy Institute – based loosely on bipartisan 2013 reforms – could help to eliminate the state’s unfunded pension liability and achieve retirement security for pensioners.
Without reform, the pension crisis will only grow. Inaction by the state legislature and governor puts retirees, taxpayers and state services at greater risk as pensions eat an ever-greater share of resources.