Illinois spent $8.5 billion to cut its pension debt. It wasn't enough.

Trying to get pension funding back on track, state officials designated $8.5 billion last year to five state-funded retirement systems.

It wasn't enough, and the pension programs for Illinois employees, state university workers, judges, legislators and educators outside Chicago fell $3.8 billion further in debt.

The backsliding resulted from factors including earning $1 billion less than projected on investments, spending $600 million extra because pensioners are living longer, and the state contributing $2.7 billion less than needed to catch up on funding, according to a recent report from the state legislature's Commission on Government Forecasting and Accountability. The debt is about $500 million more than the commission estimated in April.

The five retirement plans now carry a combined $137.3 billion in unfunded liabilities, the largest amount ever, the report said. That amounts to $10,774 for every person in Illinois.

Already concerned about underfunding of pensions, lawmakers in 1994 state law set specific funding levels that were to increase each year. The goal is to have the five retirement systems 90% funded by 2045. Next year, the state owes a combined $9.2 billion to the five pension funds to keep on track, according to the report.

But lawmakers have routinely ignored the funding targets, and miscalculations have worsened the gap. Last year, none of the five funds met their investment goals.

Another reason the pension debt continues to grow is because estimates of how long retirees will collect their pensions are routinely off. That has resulted in nearly $18.4 billion in additional debt since 1996, according to the report.

Taxpayers ultimately shoulder the cost.

Gov. J.B. Pritzker's plan to expand gambling and increase taxes and fees pushes for some of the state's new revenue to go toward pension debt. A plan to change to a graduated income tax, if approved by voters, is also designed to increase state revenue by billions of dollars with some of that going to pension funds.

Even as the pension debt grows, there is a bright spot. At the end of the 2016 fiscal year, the five pension systems were 37.6% funded. Last year marked the third consecutive year that increased. The five systems are now a combined 40.3% funded.

"Illinois' challenges were created because of decades of failure, and it will take consistent effort to put the state on strong footing," said Pritzker spokeswoman Jordan Abudayyeh, "but Gov. Pritzker is determined to build on the progress he and the General Assembly have made in his first year in office."

Abudayyeh noted Pritzker signed off on pension buyout programs intended to "reduce long-term costs." The buyouts allow future retirees to cash out their pensions at a percentage of the anticipated total cost, or new retirees can get a lump-sum payment that reduces the annual cost-of-living increase.

However, officials at some of the pensions funds said the state overestimated how many would participate.

Dave Urbanek, a spokesman at the Teachers' Retirement System, said the state expected participation of about 25%, but in reality only about 16% of new retirees participate.

"Anyone expecting the buyout programs to solve the state's pension problem is going to be sorely disappointed," Urbanek said.

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Growing unfundedCombined pension debt for five state-funded programs for educators, judges, legislators, state employees and university employees:

Year Amount

2018 $137.3 billion

2017 $133.5 billion

2016 $129.1 billion

2015 $129.8 billion

2014 $111 billion

Source: Commission on Government Forecasting and Accountability