Understanding – and Resolving Illinois’ Pension Funding Challenges

Release: June 21, 2023

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?

The 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.

Everything You Need to Know About the "Fair Tax"

Release: October 16, 2020

Do you still have questions about Illinois’ proposed amendment to the Illinois Constitution, often referred to as the “Fair Tax”? Over the past several months, the Center for Tax and Budget Accountability (“CTBA”) has been compiling some of the most frequently asked questions about the Fair Tax and has created this FAQ to help voters understand this ballot initiative.

Setting the Record Straight on Illinois’ Fiscal Shortcomings

Release: May 5, 2020

This report shows how the data make it quite clear that: Illinois incurred pension debt—under both Republicans and Democrats-- to mask its fiscal problems, not to pay irresponsibly high benefits; Illinois is not a high spending state, and in fact has cut spending on services in real terms by more than 23% since FY2000; that over $9 out of every $10 Illinois, and frankly every other state in America, spends on services goes to the four core areas of Education (including Pre-K, K-12, and Higher Ed), Healthcare, Human Services and Public Safety—meaning those are the services which are imperiled if the feds don’t come through with a significant relief package for state governments suffering revenue loss from the downturn caused by the COVID-19 pandemic; and the Pritzker Administration has actually pushed a number of fiscal initiatives that are actually responsible and counter some of the poor practices of the past.

Update: Addressing Illinois’ Pension Debt Crisis With Reamortization

Release: October 21, 2019

Illinois' five state pension systems face a debt crisis after years of intentional borrowing from state contributions. The crisis is compounded by a backloaded repayment plan that calls for unrealistic, unsustainable state contributions in future years, putting funding for crucial public services at risk. Because the crisis is about debt, rather than benefits being earned by current and future employees, attempts to solve the problem through benefit cuts have failed. CTBA proposes resolving the pension debt crisis by reamortizing our payment schedule, creating a sustainable, level-dollar plan that saves the state $45 billion and gets the pension systems 70 percent funded by 2045. The state of Illinois has foregone $22 billion in savings since CTBA originally proposed to reamortize the debt in 2018. To bridge the higher contributions called for in the first several years of the reamortization plan, CTBA suggests using bonds to ensure current services do not have to be cut.

Impact on Illinois' Structural Deficit

Release: October 21, 2019

The state of Illinois faces a significant structural deficit into the future. The report highlights the nature of the structural deficit and identifies two key causes: the state’s historically flawed  tax policy and the plan devised for repayment of Illinois’ pension debt. CTBA proposes both the adoption of the Fair Tax and a reamortization of the pension debt as described in the report titled: Addressing Illinois’ Pension Debt Crisis With Reamortization. Doing so would allow the State to ensure full funding for the Evidence Based Funding Formula while also improving the status of Illinois’ public employee pension system and eliminating the State’s structural deficit by 2042.