Understanding – and Resolving Illinois’ Pension Funding Challenges

Illinois state government has the responsibility to fund five public pension systems: the Teachers’ Retirement System (“TRS”); the State Employees’ Retirement System (“SERS”); the Judges’ Retirement System (“JRS”); the State Universities Retirement System (“SURS”); and the General Assembly Retirement System (“GARS”). But what exactly does “funding” a public pension system entail?

According to the United States Government Accountability Office (“GAO”), to be considered financially healthy, a public pension system should have a “funded ratio” of at least 80 percent.  A “funded ratio” is determined by dividing the current monetary value of a pension system’s total assets by its total liabilities.

As things stand today, the state’s pension systems are decidedly not healthy. As of November 2022, the state’s five pension systems collectively had $248 billion in liabilities, but only $109 billion in assets to cover those liabilities. This results in a funded ratio across all five state systems of just 44 percent, or fully 36 percentage points below the standard for healthy set by the GAO.  It also means Illinois state government faces a significant, as in $139 billion, aggregate “unfunded liability”—read that as “debt”—owed to its pension systems. Which begs the question: how did the state get in this predicament?

CTBA's report, “Understanding – and Resolving Illinois’ Pension Funding Challenges” provides some insights into Illinois’ pension crisis by:

1. Providing the historical context of how Illinois pensions became so underfunded;
2. Explaining where the Illinois pension debt stands today;
3. Clarifying that the debt service schedule created under the pension ramp is straining the state’s fiscal system—not the cost of funding benefits; and
4. Providing a template for re-amortizing the pension debt in a responsible manner, that would save billions in taxpayer costs while getting all five pension systems healthy.