Taxpayers funded 84% of public employee pensions in 2020
Taxpayer contributions accounted for 56% of the money that flowed into Illinois’ pension funds in 2000. Two decades later, residents funded 84% of public employees’ retirements, yet pension debt is still growing.
Illinois residents contributed 84% of the funding for the state’s five public pension systems in 2020, up from 56% 20 years earlier.
But employee contributions have remained relatively unchanged at just 5% of the individual benefits they will receive, according to an analysis of state records.
While the taxpayer contributions have grown significantly, they cannot keep up with the overpromised benefits. The state’s pension debt – the difference between what has been promised and the money to pay for those promises – stands at a nation-leading $313 billion, according to Moody’s Investors Service.
Illinois spends more of its budget on pensions that any other state, and still has the biggest gap between what it currently pays and what it would take to pay down the debt without reform. Illinois also spends more of its state and local revenues on pensions than any other state, about double the national average.
Neighboring Wisconsin employees are legally required to pay for 50% of benefits. Contributions are recalculated each year to ensure this happens. Wisconsin has no pension debt and the best funding ratio in the nation.
Illinois’ pension crisis exists because politicians played reckless funding games and deferred costs into the future, but those moves resulted from them agreeing with public worker unions to benefit levels that were too expensive for taxpayers to sustain.
The typical career government worker is set to receive lifetime retirement benefits worth around $2.3 million. Continuing to make these payments in full would require future tax hikes and continued cuts to services for the state’s most vulnerable residents, such as mental health and child protection.
Politicians at the state and local levels have historically sought creative ways to avoid making the full actuarial pension payments on the skyrocketing debt. One solution to bring payments in line with what taxpayers can afford is constitutional pension reform.
Polling commissioned by the Illinois Policy Institute shows 61% of likely voters across the state support constitutional pension reform – more than enough Illinoisans to pass an amendment if it were on the ballot today.
A “hold harmless” pension reform plan would tie all pension cost-of-living adjustments to inflation rather than the current 3% compounded annual raises, saving $2.4 billion for the state budget in the first year and more than $50 billion by 2045. It would also increase required government contributions to fully fund retirees’ promised pensions – rather than the 90% funding the state is shooting for – while protecting already earned benefits.
Opponents of pension reform often claim the pension crisis exists because politicians skipped payments or otherwise “underfunded” the systems. But underfunding is a symptom, not a cause, of Illinois’ pension crisis.
Taxpayers can’t afford to wait for the day Springfield politicians willingly put aside special interests for the public good. It’s time for Illinoisans to take the first step.
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