Moody’s Pension Data
Illinois is the nation’s extreme outlier
Illinois continues to be the nation’s extreme outlier when it comes to pensions. There is no holistic source available that allows Wirepoints to compare total state and local retirement debts across the 50 states, but state-level pension data available from Moody’s Investors Service, the national credit rating agency, shows Illinois’ debt swamps that of its neighbors and other big states.
Illinois’ $313 billion shortfall in its five state-run pension funds, as of June 30, 2020, is the largest in the country and far bigger than that of its neighbors and other big states.
California, with more than triple the population of Illinois, has a state-level shortfall of $240 billion – $70 billion less than Illinois. And Texas, with more than double the population of Illinois, has a shortfall of $173 billion – $140 billion less than Illinois.
Kentucky, suffering a pension crisis of its own, has a $56 billion state-level shortfall – just a fifth the size of Illinois’. The rest of Illinois’ neighbors have shortfalls worth just $20 billion or less.
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When measured on a per household basis, Illinois’ state-level pension debt totals more than $64,200. That’s the nation’s 2nd-largest burden, behind only Connecticut’s $65,400 per household.
Illinoisans’ state-level household burden is four times larger than the national average of $15,600, and compared to residents in neighboring Iowa and Wisconsin, Illinoisans’ burden is 18 to 20 times larger.
Iowa and Wisconsin’s per household burdens are $3,500 and $3,200, respectively.
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Please note that the following 50-state comparisons are based on state-level pension debts as of June 30, 2019, as 50-state economic and financial comparisons for June 30, 2020 are not yet available from Moody’s. Illinois’ shortfall totaled $236 billion that year.
Illinois’ state-level pension debt also makes the state an extreme outlier when measured against other economic and financial metrics.
Illinois’ state level-debts are equivalent to 27 percent of the state’s annual GDP. In most of Illinois’ neighboring states, the debt is equal to just 2 to 6 percent of the economy. Indiana’s debt is at 5 percent of GDP, while Iowa and Wisconsin’s debt are both equal to less than 2 percent of their respective GDPs. Only Kentucky, which is struggling with a pension crisis of its own, comes close to Illinois with debts equal to 23 percent of GDP.
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Illinois’ debts are also the nation’s-most when compared to state revenues. State pension debts are equal to 433 percent of Illinois’ tax (own-source) revenues, which is nearly four times the national average of 116 percent, and 15 times higher compared to Wisconsin’s 28 percent of revenues.
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Illinois also has, by far, the highest pension costs as a percentage of state revenues. Moody’s says Illinois’ “tread water” pension cost – the annual state contribution required to make sure the state’s pension shortfall doesn’t grow from one year to the next – equals 21 percent of Illinois’ tax (own-source) revenues.
No other state comes close to that amount. Connecticut’s tread water cost equals 15 percent of revenues, the national average is just 4 percent, and all of Illinois’ neighbors’ costs, except Kentucky, equal just 5 percent or less of revenues.
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Illinois is also an extreme outlier when it comes to retirement security for state workers. Illinois state-level pensions were only 28 percent funded in 2019. A funded ratio of 60 percent or below is often seen as a “point of no return” for pension funds.
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