The State of Illinois is gradually plunging into a deeper crisis over its public pensions. The analysis shows that the past 20 years have seen a 500 percent increase in the government’s burden as regards public pension. Currently, the Illinois state’s pension obligation to retired workers amounts to over $214 billion in underfunded obligations. This is as compared to the $85 billion worth of pension payouts that the state currently pays.
Among the leading underfunded state pension plans include the teachers’ retirement pension system and the state university retirement system. Other retired public workers catered for by the Illinois state pension plan include judges, general assembly members, and state employees. Illinois happens to be the third state in the country, after New Jersey and Kentucky, which has the highest unfunded pension ratios. The rising funding gap can be traced as far back as several decades ago; caused by annual underfunding of employer contributions, increasing benefits, and increasing mortality rates. All of these factors have negatively affected Illinois’ public pension liabilities.
The pension crisis in Illinois is gradually crippling the government’s ability to effectively discharge its core services and other investment projects. With the pension payments having grown by over 500 percent between 2000 and this year, investments in health insurance and education have only achieved a 127 percent and 21 percent growth respectively. The state’s focus on meeting its objective in funding the pension program has taken a huge toll on other aspects of spending, especially since the governor’s office has been forced to defund some projects.
Two solutions have been proposed in the bid to address this growing issue. The first proposition focuses on increasing state budget contributions by raising taxes and other revenue streams. The other promising proposition focuses on gradually adjusting the benefit calculation criteria used to compute the amount of pension that retired workers receive. The state government has also been contemplating increasing retirement age for employees in order to defer the commencement of pension payment to state workers.
Of all the propositions, stakeholders have been pushing for constitutional pension reform as part of the long-term solution to the crisis. Lawmakers have been pushing for reforms to be instituted in line with reducing pension benefits and making sure that they are in tandem with the current economic reality. Whichever solution that will be implemented, it should receive the necessary political and stakeholder commitment. One thing we know for sure is that, yet again, Illinois is turning a blind eye to an increasing problem.