Illinois public pension debt grows to $140B

Bryce Hill

Director of Fiscal and Economic Research

Bryce Hill
December 14, 2022

Illinois public pension debt grows to $140B

Illinois’ five statewide pensions system saw their debt increase by nearly $10 billion to a grand total of $140 billion in fiscal year 2022. Pensions will cost the state nearly $11 billion next year, but that’s still $4.4 billion too little.

Illinois’ state pension debt now stands at $139.7 billion, according to a new report from the Illinois General Assembly’s Commission on Government Forecasting and Accountability.

That is up $9.8 billion from 2021, when state pensions were benefitting from healthy investment returns. After markets cooled substantially, state pension debt in the fiscal year that ended July 1 continued to grow, increasing for the 11th time in 15 years.


Despite growth in the Illinois’ unfunded pension liabilities, the state is planning on reducing pension appropriations in fiscal year 2024. Expected pension appropriations are scheduled to fall by $40 million based on the systems’ preliminary certification letters.

Plus, COGFA reporting shows state lawmakers are knowingly planning to underfund the state’s pension contribution by more than $4.4 billion in 2024. Illinois’ budget is expected to contribute nearly $10.94 billion to state pension systems in FY 2024 under P.A. 88-0593. However, the state retirement plans’ own actuaries determined contributions in the coming year would need to total nearly $15.37 billion to actually begin paying off the state’s pension debt under funding requirements pursuant to the Governmental Accounting Standards Board Statements 67 and 68.

The fact that Illinois’ annual pension contributions have historically been lower than actuaries said was needed is one of the major reasons why the state’s pension debt has continued to grow. Since the inception of the state’s current funding schedule in fiscal year 1996, the state has shorted the funds by $58.5 billion.

Meanwhile, missed investment returns, which were the primary driver of the increase in pension debt last year, have added more than $12 billion to the state’s unfunded pension liabilities since 1996. These figures are expected to grow in coming years, as Illinois’ statutorily required funding continues to be insufficient to pay off the state’s unfunded pension liabilities and a prolonged market downturn hamstrings investment income.

As unfunded pension liabilities grow, pension funding ratios, which are currently at 44% across Illinois’ five state systems, will likely fall. Experts warn that 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.

Lawmakers in Springfield must pursue pension reform in order to achieve retirement security for Illinois’ public servants. A “hold harmless” pension reform plan similar to 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.

Previous analysis showed changes such as capping pensionable salary, replacing cost-of-living adjustments with true cost-of-living increases and adjustments to realigning benefits with historical inflation rates would have saved the state $2.4 billion in the first year alone, and more than $50 billion by 2045. It would also fully fund the plans, as opposed to the state’s goal of 90% funding, to truly safeguard retirees’ benefits.

Without reform, Illinois’ unfunded liabilities will continue to grow and the state’s pension systems will become even leaner, putting the retirement of Illinois’ public servants at risk.

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