State Unfunded Pension Liability Has Skyrocketed in Last 15 Years
Police officers, teachers, caregivers and other public servants join Illinois AFL-CIO members to protest the state's pension situation on Oct. 26, 2011, at the Illinois Capitol in Springfield.
A new state report shows the state’s unfunded pension liability has grown by over $100 billion in the past 15 years and will only grow without reform.
In the report, written by Julie Bae, a pension analyst for the bipartisan, bicameral Commission on Government Forecasting and Accountability (COGFA), shows a combined unfunded liability of around $40 billion in 2006. Today, that unfunded liability has ballooned to around $144 billion.
Why? Because state pension payments aren’t keeping up.
“One of the main drivers continues to be actuarially insufficient State contributions determined by the current pension funding policy,” Bae wrote. “As the actuaries for the State retirement systems have noted in the respective annual actuarial valuation reports, the funding plan produces employer (State) contributions that are actuarially insufficient, meaning if all other actuarial assumptions are met, unfunded liabilities will still increase due to the State contributing an amount that is not sufficient to stop the growth in the unfunded liability.”
The report shows the unfunded liability grew by around $4 billion during fiscal year 2020, which ended July 1. That was an increase of 2.8% over FY 2019.
Bae wrote lower-than-assumed investment returns by all the five state pension systems due to the COVID-19 pandemic made up the most loss in 2020. Early retirements by teachers and state university employees and higher-than-assumed salary increases exacerbated the issue.
The state legislature budgeted about $9.8 billion for pension payments in the current fiscal year. COGFA estimates that will need to go up another $800 million dollars next year just to fully fund pensions.
The Teachers’ Retirement System is the worst funded of the five public pension funds, with an unfunded liability over $83 billion. Some lawmakers have argued school districts should pay more of teacher pensions, but the move has been resisted thus far.
Governor JB Pritzker had insinuated a portion of revenue from a graduated income tax would go to close the state’s structural deficit. But now, lawmakers have to find a way to make the pension payment and still attempt to close a $4 billion deficit in the current fiscal year.
To find the whole report, click here.