Lawmakers consider borrowing $107B to pour into Illinois pensions
Record-breaking borrowing to fund Illinois' even more massive pension debt is no real solution to the state's pension problem.
Illinois state lawmakers on Jan. 30 heard a proposal to borrow more than $107 billion to fund pensions. If implemented, it would be the biggest debt sale in municipal bond market history.
Lawmakers discussed the proposal in the House Personnel & Pensions Committee.
The State Universities Annuitants Association, or SUAA, claims the plan will save the state $103 billion in the next 25 years. But baked into that estimate are assumptions regarding borrowing and investment returns that are by no means guaranteed.
Illinois’ pension debt is as high as $250 billion, according to Moody’s Investment Service. The SUAA plan is supposed to bring Illinois’ five public pension systems from 38 percent funded to 90 percent funded in a single surge of borrowing.
But Illinois’ credit rating is already just one notch above junk – the worst in the nation. Taking on a record amount of debt will do that credit rating no favors.
Not only that, but the association’s proposal ignores the root of the issue: the exploding cost of Illinois pensions.
The first step Illinois must take toward real pension reform is simple – new employees should be moved into a defined-contribution plan that they can control, and existing employees should be given the option to opt in. The plan should be modeled after the self-managed plan that’s been offered to state university employees for nearly 20 years.
What Illinois does not need is a new scheme to ruin its credit rating while perpetuating the failures of the current pension system.