By: Ted Dabrowski and John Klingner
It’s the only reasonable conclusion. Illinois politicians who continue to oppose pension reform via a constitutional amendment should be booted from office. The latest state-by-state pension report from Fitch Ratings demonstrates why.
At $172 billion,* Illinois has the nation’s biggest pension shortfall by far, the agency says. Fitch also calculates that Illinois’ pension debt as a share of its economy is the largest in the country. Either way, Illinois is the nation’s extreme outlier.
To get an idea of just how out of whack Illinois is, consider the pension shortfalls of its neighbors. Indiana’s is just $11 billion. Michigan’s, $8 billion. Wisconsin’s, $4 billion. Iowa’s, $2 billion.
Politicians from both sides of the aisle have made this mess over the past few decades. They’ve doled out benefits far faster than Illinois taxpayers could ever pay for them, which we’ve documented in great detail here and here. Lawmakers continued to sweeten those benefits – like compounded colas – even as the crisis deepened. Illinois politicians were even charged by the SEC for securities fraud from 2005 to 2009 when they misled municipal bond investors about the state’s approach to funding its pension obligations.
It’s impossible to overstate just how menacing those massive pension shortfalls are to the future of this state and to the future of everyday Illinoisans. Illinoisans already pay the nation’s highest property taxes. Home values have barely kept up with inflation since 2000 – Illinois has had the country’s worst housing performance. And a net of more than 1.5 million residents have been squeezed out of the state over the last two decades. Households across the state are being impoverished and families are being broken up, in large part due to the crushing cost of pensions.
To better capture just how large each state’s debts really are, Fitch also compared each state’s pension debt to the size of its economy. Under this measure, Illinois pension debts are equal to nearly 20% of the state’s economy, the highest percentage in the country.**
By contrast, the pension debts of Michigan, Wisconsin and Iowa are equal to just 1% of each of those state economies. Missouri’s and Indiana’s are around 3%. None of those economies aren’t being strangled by pension costs that either rob the budget of precious funds for other core services, or that force taxes higher to pay for them.
Despite all the above, Illinois lawmakers won’t do anything about pensions. Legislators have refused to address the issue for decades and Gov. J.B. Pritzker is even on record describing any pension reform ideas as “fantasy.” That’s not surprising, as any reform would entail taking on the state’s public sector unions and that would endanger the governor and his party’s supermajority power.
For everyday Illinoisans, there’s really not much more to decide. Either keep taking the abuse, or kick out lawmakers who won’t back a constitutional amendment allowing for pension reform.
*Fitch uses a 6% discount rate to arrive at its total pension liability for each state. That results in a $172 billion shortfall for Illinois, somewhat higher than Illinois’ officially reported shortfall of $140 billion.
**Annual Personal Income serves as a proxy for economic growth. Personal Incomes totalled about $900 million while Illinois’ GDP totals about $1 trillion.
Appendix
Read more from Wirepoints:
- Solving Illinois’ Pension Problem: Why It’s Legal, Why It’s Necessary, and What It Looks Like – Wirepoints Special Report
- Solving Illinois’ Pension Problem | Part 3: Why Pension Reform is Legal
- Pritzker Administration repeats its mother of all whoppers: ‘Illinois is not losing people
- Chicago’s worst-in-nation pension crisis strikes again
- Illinois government’s $100K salary and pension club: 140,000 members and rising
- An Open Letter to Mayor Brandon Johnson on the forthcoming recommendations of his Pension Working Group
Audio and summary 
If this bill passes, say goodbye to local control over all Illinois parks and expect to see open drug and alcohol use, needles, no sanitation and fire hazards, but no ordinary park users.
No change until there is a GOP GA and Governor. Even then the finance issues will be very difficult to solve, at least legally.
However, ignore my above statement as there will not be a GOP Governor and GA. Illinois is a DEEP, DEEP Blue state and that is not changing.
Racial demographics prevent it. Fewer and Fewer Whites ( who generally vote about 58% GOP) vs Blacks, Hispanics and Asians who vote for DEMS.
Just make pension payout a function of what has been paid in/ per individual. Now it is based on the last few years of earnings.
To show you what a joke the ratings agency racket is, this is a Fitch report. $170 billion in pension debt. Obviously way beyond the means of Illinois to ever pay. Wow. A stunner. But Fitch also recently rated an Illinois debt issue an A-. What? Does one department over there ever speak to the other department. Probably not, since Illinois pays Fitch for the ratings, so who is going to dump on the client paying your salaries?
There isn’t an appetite for pension reform, and even if there were, the legal challenges would take a decade or longer to iron it out. Likewise, there isn’t an appetite to deal with the revenue side of the equation (tax increases), as the Illinois politicians aren’t about to get kicked out of their job, where they enjoy kickbacks. Pritzker will be loathe to sign off on an increase in the flat tax rate, and he doesn’t want to anger the senior citizen base by suggesting a tax on retirement income. So that leaves the Illinois tradition of can kicking. The… Read more »
“Either keep taking the abuse, or kick out lawmakers who won’t back a constitutional amendment allowing for pension reform.” << WP article above
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“Watching from a distance is the best option.” << Ex Illini comment above
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Sorry WP, but Ex Illini has the more realistic solution.
Other than wirepoints and the people who read it, apparently nobody else in the state cares. So therefore, I can only assume it is not a big deal. After all didn’t one of the government leeches who used to post here claim that no matter what, the pensions will be paid first. You have all been warned that a major problem exists. If you stay, you must not believe that. If the crap really does hit the fan, I’m sure that you will all just meekly pay up and go back to being the good little slaves that you are.… Read more »
People do care. Everyone knows the pensions are a mess. Even the most low information voter in Illinois knows how screwed up the pension system is. The reason we can’t do anything about it is because we can’t. There was an 8 point shift to Trump in the electorate. In politics, that’s a *massive* swing. Not one state legislative seat flipped. Not one congressional seat changed. Nothing. Literally nothing happen. We can’t vote our way out of this. This is by design. The Democrat Party has hijacked the state with a slim majority of ballots/voters and now they control everything.… Read more »
The rigged voting (aka gerrymandering) in Illinois sounds incredibly similar to Texas.
Has any progress been made with lowering second Illinois pension debt to GDP ratio with all the massive increased payments and increased GDP due to COVID-ARPA stimulus from pre-COVID to post-COVID for the state pensions and all the zillion municipal pensions would seem the BIG question? I’ll bet NOT, because Illinois GDP was/is so artificially inflated with COID-ARPA stimulus. All the dopey taxpayer are feed is the astronomical pension debt is their fault because of the elected officials (like Rauner) who skipped payments. Not to mention whatever Springfield/ Martwick & co are going to do to “fix” Tier II currently… Read more »
You can listen to very excellent Greg Bishop-Illinois In Focus Daily/Center Square show at approx min 13:40 to hear what are lord Martwick is proposing as TIER II “fix” on behalf of are public sec heroes vrs JB’s minimum “fix”…or just load up the U-haul: (https://www.youtube.com/watch?v=74SjmD-_jmI)
I believe SB2024 is the Martwick/Unions TIER II ‘fix”(https://www.hannah-il.com/ShowDocument.aspx?UserDocID=570)? If JB signs on, will that sink his national political ambitions?
Dear public employees, how do you expect these pensions to be paid? Your schools are putting out graduates who can barely read. Schools should be turning out productive citizens who will pay taxes to fund your pensions. Instead, your schools produce mostly people who will be compete with you for the increasingly scarce public funds. Demand change if only for your own self interest.
We expect it to be paid monthly by electronic funds transfer. We expect a 3% increase every year. We expect taxes to rise to help pay for them. We expect people like yourself to misdirect their anger at people with pensions.
Good luck RNUG. You will need it. Where did you get the idea that listing your expectations guarantees that they will appear? Is that what they teach you in school?
RNUG (PPF) is just another public union idiot that will have his unsustainable pension cut when they go broke. Taxes cannot be raised forever, and IL already has taxes that are too high. In time state bankruptcy allowance will be allowed because there will no no other option. Math always wins, and so the pensions, and idiot RNUG, will lose.
Mark, go ahead and block RNUG now, because he is the spam formerly known as PPF. PPF is the biggest loser on this board by far.
We don’t block people because of their viewpoints and it’s not at all clear to me they are the same person.
But you should block people for saying over and over that taxes will just be raised and bragging like an idiot about that when in reality taxes cannot be raised forever, which you also agree on. You let that idiot spam on here forever when you shouldn’t have. He also personally attacks commenters on here, which you also allowed forever. Calling him an idiot is not an attack, it is fact. If you want to be a doormat and allow him to spam all over your site again then go right ahead. In the end his pension is toast, and… Read more »
And if there is even a hint of a personal attack from RNUG to me on this thread then you better not let it through Mark. That is the standard you said you would keep on here, and you haven’t kept it.
Huh? Personal attacks are routine here. We discourage them but they happen. We don’t have time to read comments closely enough to protect people from insults.
Nice job deleting my comment about you not making sense telling me not to insult Rich Miller yet also saying you allow insults. That only proves me right. RNUG/PPF is dumb spam, and his pension is doomed. I will enjoy it greatly when that day arrives that his pension is cut majorly.
Jeez. Stop acting like a Democrat and whining to the teacher. Make a reasonable argument and grow a pair (If you know what biologically defines a male, Ketanji).
The state has a budget deficit that adds up to over 20 billion for the next 5 years. I didn’t think stating that taxes would increase would cause someone to want to block me. It seems obvious that this will most likely happen. The state hasn’t shown any effort to cut legally allowable spending so I don’t see legally protected pensions being cut any time soon. This is just my opinion. Didn’t realize differing opinions were not welcome here Ben. You seem to be easily triggered.
You are correct. Taxes will rise precipitously and the pensions will not be cut. The unions that own the democrats will not allow that. And everyone living there will pay in one way or another. And it will be so justly deserved. This is what you voted for. So either bend over for your masters again and shut up or leave before they figure out how to steal your money. If you stay, make sure you have a good supply of skin lube on hand for the frequent screwing you are about to get. If you think there are any… Read more »
RNUG – I agree with you on both points. But the question remains as to whether taxes can be raised and collected in sufficient amounts to avoid pension collapse. The funds which are 20 percent funded are at risk of collapse. Pay go status would ruin any budget. 80 percent of property taxes in the City go towards pensions. There is resistance now to raising the tax in any amount. Pointing out an intractable situation is not necessarily political. And I agree you should feel free to make comments. At some point though the whole thing becomes a massive math… Read more »
That’s quite a bit different from your comment that started this tiff. Glad to see you recognize that there is a huge budget deficit problem, instead of just listing demands. So next can we get beyond “muh contract” and look for real solutions? Really, that would be beneficial to all, including the pensioners.
You asked how we expected pensions to be paid and I answered. Just providing facts that we expect to be paid and we expect our pensions to increase 3% each year. We understand the state is in a deep fiscal hole and that we expect tax increases will most likely be necessary because the state doesn’t seem to cut spending. Wasn’t trying to cause any tiff but just answering honestly. You can expect us to demand our pensions be paid to contract and you can expect us to use the legal system to get paid what is owed. 99% of… Read more »
That’s an impressive list of expectations. No further discussion needed; I see you have it all figured out. New name, same old stuff. As I’ve said before, I’m not angry. I’m disgusted.
Sorry you feel that way. Have a Happy Thanksgiving!
RNUG – while some attack pensioners, reasonable people recognize the most pressing problem is the sustainability of the pension system and its enormous debt. The issues present differently now that COVID funds are disappearing. It is far from assured that taxes can be raised to a sufficient level to fund the pensions properly. And political entities in Illinois seem incapable of curbing spending. Moreover Chicago is the epicenter of the pension problem. The City has considerably fewer ways to collect taxes than the State and recent tax initiatives are failing. Witness Bring Chicago home and a 50-0 vote in the… Read more »
Chicago pensions will collapse first and be cut and in time the state as well. There will no choice in the matter because there will be no other option. The many will win out over the few. Chicago’s collapse of pensions will only accelerate the collapse of the state pensions. Math will force the issue.
PCM, Great name and spot-on comment. The corrupt Illinois Public Employees are complete and total participants in this votes-and-campaign-funding-bribes in exchange for obscene-above-market-wages-no-show-little-‘work’-jobs-and-cadillac-health-care-plan crime. Quid. Pro. Quo. These Criminal Co-conspirators along with the Illinois Politicians who ran this decades-long grift should not benefit from their theft. Period. Massive pension cuts are the only answer and the only just solution. The taxpayers have already paid their share. The well is dry. The bank vault is empty. Now, as these Pension thieves see their future looming, they cower behind the real workers of Illinois and claim to be hapless, helpless innocents simply… Read more »
You can’t keep electing the same politicians and expect different results.
What about OPEB? Report says 206.5 billion with that included. Those are pay as you go in IL.
And yet Democrats keep voting for the same things over and over and over. Is there even a tipping point on this where voters will vote against the single party ruling class?
At this point a collapse may be more salutary than a fix.
Reform pensions now if you have any remaining self-respect or beg the GOP-led Congress and Trump to add spendthrift states to the federal bankruptcy code and wait for an unelected emergency manager to reform it for you.
Be careful how you use the phrase “reform pensions.” They think it means to further milk the taxpayers.
I’ve been saying this for years. What are the actual pension management fees for various funds in Illinois compared to similar funds in other states? Billions and billions every decade is my guess. https://www.pewtrusts.org/en/research-and-analysis/issue-briefs/2023/10/transparency-in-investment-disclosures-helps-promote-effective-public-pension-administration As for the Civic Federation link look who is at the top of the list for fees. The article only has info to 2017 so how much are the fees vs returns since then and what percentage are they now? With all the billions received from the Feds the last few years where is the money now? The politically connected who received these contracts have found… Read more »