By Ted Dabrowski and John Klingner
You’ll soon be hearing from Illinois politicians how the state’s pension crisis is on the mend. Don’t buy it.
New preliminary state pension data released Tuesday shows Illinoisans are back to owing $130 billion in state pension debts as of June 2021, down from $144 billion the year before. The state’s funded ratio has also improved to 46 percent, up from 39 percent. On the face of it, that’s good. Of course less debt is better than more debt.
So why would we deflate the good pension news? Here are four reasons why.
First, it took what Pew calls a “once-in-a-generation” jump in the stock market to bring down the state’s debts, so the results are a one-off. Illinois’ five state-run pension funds had outsized returns of anywhere from 23 to 25 percent in 2021 (the funds have a June 30 fiscal year end).
Twenty-five percent returns are so rare they’ve only happened once in the last 30 years, according to a recent Pew analysis of pension returns. The below graphic shows how difficult it is to achieve annual investment returns over 20 percent.
Even more, no one knows how sustainable the current market is. It’s being propped up by trillions from the Federal Reserve’s printing press and trillions more in federal spending. If anything goes wrong, a significant correction is not out of the question.
Second, the General Assembly had nothing to do with the improvement. Lawmakers have passed no state pension reforms of any kind in recent years. In fact, Gov. Pritzker and the General Assembly have only made government more expensive, during the past few years, not less.
Third, the debt drop only takes us back to 2017, when we were already in deep crisis. Even though pension debts dropped by nearly 10 percent in 2021 – which sounds like a lot – the state’s debts are only back to where they were just four years ago. That’s when former Gov. Rauner and then House Speaker Mike Madigan were fighting over Illinois’ budget, the state already had the nation’s worst pension crisis and Illinois’ credit rating was just one notch away from junk.
Fourth, Illinois’ pension crisis is far larger than the official numbers say. Even if you want to celebrate the fall in the official debt, Moody’s more realistic pension estimates for the five state-run funds are far more dire. For 2020, Moody’s reported a record $313 billion in pension debts, nearly $180 billion more than what the state estimates.
This year, Wirepoints estimates Illinoisans will still likely be on the hook for over $280 billion in debt. That’s down from 2020, but still the 2nd-highest amount ever.
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In all, Illinoisans are on the hook for more than $500 billion in state and local pension shortfalls. That’s about, on average, $110,000 per Illinois household, more than can ever be repaid.
The only time to celebrate will be when a pension amendment to the Illinois Constitution is finally passed – here’s our suggested language – and structural reforms are subsequently enacted – read about Wirepoints’ Pension Solutions plan here.
Read more about Illinois’ pension crisis:
A largely unasked question is becoming glaring: Is Illinois doing all it should to use artificial intelligence to make government cost less and work better? So far, the evidence says no.
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.
I like to browse the Cogfa reports once in a while. The thing I notice is that the projections change from year to year and they do not get better. The projections from 2015 show total employer contribution of $318 billion from 2021 to 2045. In the 2020 report, I get total employer contributions of $366 Billion. Also, there is an ending balance of $33 Billion in both cases. If the liability is underestimated, I assume the ending balance is a lot bigger than $33 Billion. An ending balance is adding insult to injury for sure! The cash outlay is… Read more »
Those suggested words to amend the state constitution works for me.
In another article here today it was reported about the windfall of tax revenue from marijuana sales. While there was an analysis of where the windfall was going to be spent I didn’t notice any of the funds going towards the pension underfunding. Did I miss something?
Now we know the extremely optimal conditions necessary to reduce pension debt by a mere 10%. Think about that. The largest pension payment ever made by the state, as close to ARC as we may have ever gotten, during a phenomenal market run. As good as it gets.
With this great news, maybe the state can increase the automatic annual increase from 3% to 5.5%. With all this inflation these pensioners need our help.
Oh, brother. Expect your online floggings to begin! I hope you have the armor to deal with it.
Flog away! What a terrible idea. Such a COLA increase would accelerate the rapid depletion of the pension funds.
Would love to, but there are no takebacks in pension enhancements. Once AAI is increased to 5.5%, it’s forever 5.5%. Darn pension clause!
None of it’s real – all inflation. QE forever, spend, spend, spend, print, print, print.
The light at the end of the tunnel is still a speeding train. The brief respite from spiraling pension (and benefits) debt only provides our leaders with an opportunity to kick the can down the road while spending more and lining their own pockets. The headlines are focused on other things the media can’t get enough of, like 11 year old carjackers, a fading pandemic that they need to keep going and the daily dose of woke tragedies. It’s not pretty but there it is.
Sweet, just 10 more consecutive years of this and we’re home free.
Does anyone believe ANYTHING these fake assed politicians say,all they do is LIE,most of the Illinois politicians probably got beat up a lot in school,weak,lame,is anyone as sick of these liars,lame asses as me,or probably JB and Lori Lighthead will get re-elected like Kim Foxx,bunch freaking dopes in this state,Illinois is a hopeless cause,its gone because of the mopes that keep re-electing democrats,yea,I mean you Chicago dopey voters!!