Pension liability is killing economy

State and local lawmakers all over the country are struggling to balance budgets, cutting everything from education to law enforcement and even raising taxes, to do so. But another budgetary albatross is even more threatening: the future costs of state health care and pension programs.

The Government Accountability Office recommends public pension systems maintain a funding-to-liability ratio of at very least 80 percent. According to the Pew Center for the States, the Illinois pension system is only 51 percent funded. Unfunded liabilities total about $86 billion, more than double the $35 billion the state estimated just nine years ago. When retiree health care liabilities are added, that total will soon reach $140 billion.

Illinois’ numbers are the bleakest of any state and are the result of years of overspending (in general) and neglect (ignoring the problem by shifting funds around to mask the situation). Pension expert Jeremy Gold said, “Illinois is a poster child for pension abuses ... One of my colleagues calls this child abuse because our children must pay for our fiscal irresponsibility.”

Without reform the 175,000 retirees who currently depend on Illinois’ pension and retirement health care system, and another 276,000 current state employees who will eventually depend on this system, will be out of luck. The risks of doing nothing, or too little, are extremely high: funding for the system will crowd out spending on other important budget items like education; seniors who rely on their pensions will not receive payments; or interest and tax rates on Illinois state debt will skyrocket, killing the state’s economy and job market. That’s why Illinois must reform its pension and retiree health care systems — now.

Gretchen Hamel

Executive director

Public Notice