By: Ted Dabrowski and John Klingner

Moody’s Investors Service has updated its state-by-state pension liability report and if there’s one key takeaway, it’s that Illinois is the nation’s extreme outlier when it comes to pension shortfalls. Moody’s says Illinois’ state pension shortfall fell by 3.6 percent in 2018, similar to the national average, but that small reduction did nothing to drop Illinois from its worst-in-the-nation ranking.

The Moody’s report is one of those cases where the data speaks for itself. Line up the country’s 50 states and Illinois is likely to be the outlier.

Take pension debts. Illinois has a $241 billion shortfall, down from $250 billion in 2017, in its five state-run pension funds, according to Moody’s methodology.* Illinois’ pension shortfall not only dwarfs those of notorious New Jersey ($113 billion), but also those of far bigger states California ($231 billion) and Texas ($133 billion) and those of its neighbors. Iowa has just a $5 billion shortfall, Wisconsin, only $11 billion.

On a per capita basis, Illinoisans are on the hook for more pension debts than residents in any other state. At nearly $19,000 per person, Illinoisans face a retirement burden 6 to 12 times bigger than most of their neighbors. The national average for pension debt is just $2,903 per person.

To get a sense of how large those debts are relative to each state’s budget and economy, Moody’s compared retirement shortfalls to each state’s tax revenues and its GDP. Unsurprisingly, Illinois’ massive shortfalls translate into a massive share of each.

Illinois leads the nation, by far, for pension shortfalls as a percentage of annual state revenues (own-source revenues). At 505 percent, no other state even comes close. 

Even Kentucky, which is embroiled in its own pension crisis, has shortfalls equal to just 300 percent of its revenues.

Illinois is yet again the nation’s extreme outlier when pension debts are compared to the size of the state’s economy. Illinois’ pension shortfalls equal almost 30 percent of the state’s GDP. Meanwhile, Indiana, Missouri, Wisconsin and Iowa’s shortfalls are all less than 10 percent of their GDP.

Moody’s report also contains new data on each state’s retiree health obligations (known as OPEBs) as a result of new GASB reporting requirements. Wirepoints will follow up with a report on the OPEB numbers shortly.

The outlier

The numbers above only include the debts of Illinois’ five state-run pension funds. They don’t include the debts faced by Chicago, Cook County and hundreds of other Illinois cities.

Illinois’ crippling pension debts are all part of serious fiscal and demographic crises that continue to tear at the state. Illinois is already the worst-rated state in the nation and Moody’s puts the state’s credit just one notch away from junk. No state has ever been rated junk in modern history.

Compounding those financial problems is the fact that residents continue to leave the state in record numbers. The state’s out-migration crisis is second only to New York, with Illinois suffering a net loss of 1.5 million residents since 2000. 

That situation is unlikely to change given the state’s political leadership has rebuffed calls for an amendment to the Illinois Constitution’s pension protection clause. Without that amendment, pensions benefits for government workers can’t be reformed – not even for benefits that have yet to be earned.

Nobody is winning from that stance. Retirement security for government workers, especially in the city of Chicago and other municipalities across the state, has collapsed. Property taxes continue to rise despite already being the highest in the nation. And the possibility of a progressive income tax threatens to send even more Illinoisans over the border.

The silver lining for Illinoisans? Things that can’t go on forever, don’t. When the pain gets so bad and politicians finally run out of can-kicks, reforms may finally have a chance.

*The biggest driver of the difference between Moody’s calculations and states’ official numbers is the discount rate – the rate used to determine just how much the states owe in pension benefits. Moody’s uses far lower rates than most states assume – which it says is a far more appropriate measure of risk.

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poor taxpayer

Solve the Problem with a U Haul headed to Florida (zero income tax).
Tens of Thousands of people from Illinois are doing this way.
The greed of the public sector will never end.
Run for your economic life.
Illinois is burnt toast.
Destroyed my Democrats.


We deserve it. You don’t know what it’s like picking up a naked four hundred pounder off of the floor at three A.M.

Poor Taxpayer

You do not know what it is like to earn an honest living. Stealing from Widows and Orphans is what you are doing. Destroying the quality of life for everyone around you. Move to Florida and enjoy the good life.


Moody’s has given us this nice Pareto of states, worst to best. I’m wondering are there any states better than Illinois on this list but rated worse? That would be an indication that Moodys is playing favorites, arbitrary, incompetent, etc.

Peter, if I am understanding you correctly, the answer to your question is in the last graph of this piece. There you will find all 50 states in order or credit rating by Moody’s. No, no state is close to Illinois’ ranking. Illinois is rated three notches worse than New Jersey…Unfortunately, we are consistently worse…

Wise Willy World

Hey, alright – we’re number one in something.

Peter Quilici

The time has passed in hopes of Illinois citizens grasping the fiscal black hole into which they are falling. The numbers, graphs and projections cause the eyes to glaze over. And the parties with an interest in the public sector pension status quo appear to have the loudest bullhorn.

How about another approach?

Start emphasizing and describing crowding out of essential government services (eg., police, family and children welfare services, quality public schools for all, healthcare for the poor, etc.) by escalating pension costs for a minority of citizens as a form of Social Injustice.

Dead on, Peter. We tend to ignore that because we’re thinking it should be obvious, but it’s not to many folks. We need to beat people over the head with that, and it’s so true. Quite a few years ago I wrote about one of the first things that was being cut, which was aid for the mentally disabled. It’s no coincidence that they have no political voice of their own.

Joe Blow

who with a straight face can even say it isn’t already junk?

Hank Scorpio

% of GDP and % of Rev says it all. Simply untenable.


Many of the public union slobs over at Cap Fax are going crazy over this pension report. Even some of the most biased on the site cannot argue with how this report without a doubt shows the pensions are doomed mathematically. I feel like some of them had a big wake up call with it. Good.


Without pension reform, the public union types cannot explain mathematically how to close the pension liability gap. And they lack understanding of how investments and markets work in the real world. As to the latter point, just look at one year of negative returns can do to a pension fund. In fact, it makes Moody’s selection of a 4.5 percent discount rate seem generous. Lose 8 percent in one year? It takes three years of good returns to make it back to even. And given the pensions are going to the end of the risk curve to get returns, and… Read more »


There are more causes to the pension problems than I have fingers to point and your comment “they are often doing crony investment deals” represents something that even the State employees should be concerned with. Seriously, why can’t the pension funds utilize total market index funds that includes both bonds and stocks supplemented with US Treasury issues bought directly from the Federal Reserve Bank? There are assorted statistical studies that show that most managers can not beat the indexes and the US Treasury Notes and bills are as rock solid as one can get these days in the markets. Presto… Read more »


How is that possible that the comments are flowing from State employees to the Capitol Fax messaging system during working hours? These people do have jobs to do,,,don’t they?

And those are just the comments that were selectively allowed on the rigged, dishonest comment board.


Oswego Wily is one of the dumbest people I have ever seen talk about Illinois, and yet he is allowed to say whatever he wants on that board. He obviously subscribes, and Miller wants his money more than he wants smart comments. That is truly why the whole board operates as it does- money for Miller from union stooges. RNUG acts as if 100% of the budget can go to pensions, which is of course idiotic and untrue. He is just another public union dope who Miller lets say whatever he wants, even though he is wrong often. Rich Miller… Read more »

Adam, have you ever tried to post a comment there that didn’t get posted — one that wasn’t properly censored for some reason?


I have had plenty of comments not posted there. Most of the comments were simply stating facts with no anger in them at all, but rarely do they even make it through. I have stopped trying to comment there now, as not only will you get shouted down for speaking reality even if it makes it through, but you can tell Miller is making sure that comments that would get through that would anger or question his subscribers are not allowed. I think Miller knows Oswego (and others there) is an idiot, and I think he knows the pensions are… Read more »


Sometimes it takes a few seconds or more for it to post, it’s like the site gets hung up or something, I lose a comment here or there you. There’s a little bar as the top of the screen that goes back and forth while it’s processing the comment.


I would think I am blocked by now. I pointed out once how Miller himself even stated the pensions could collapse and not be paid. I took his quote and posted it, and pointed it out to RNUG who said that could never happen. I said how Miller himself said it could and posted the quote. That was my last comment posted. That makes my point about angering his favorite people who give him $500 a year. Cap Fax looks straight out of 1997 by the way; it looks very cheap.


I would love love love to see a Trib article or Breitbart article about those two individuals showing how they are likely on the government dime posting dozens and dozens of comments a day. A statistical analysis of all the time these people spend over the years, on taxpayer dollar, making inane comments. Hopefully they get fired before their pension vests. Now, I’m not wishing this upon them for their political views, but rather, because they are likely wasting tax payer dollars posting all day. The irony would be if they were retired, collecting pensions and posting all day. The… Read more »


RNUG says he is retired and doesn’t get a pension from the state, but that is a lie because he once posted a comment that mentioned his pension in a manner which only could be from the state. I called him out on it, and surprise, my comment was not posted. He also wouldn’t spend all day on there defending pensions if he didn’t have one. He is a liar, and his pension is doomed. OsRetard Wily also lies and says he doesn’t have a pension (even though he literally lives on the board defending the pensions and Mike Madigan),… Read more »


Ever notice how every now and then an article gets posted here that’s particularly critical, and all the sensible comments get downvoted? I would almost bet real $ that it’s Miller’s goons. I’d also bet they have the mistaken belief that enough negative votes will get comments hidden.


I enjoy those, because I know people like OsRetard have read them, and Rich “fatty” Miller can’t sweep in between beers and delete the truth.

Personally, that doesn’t bother me if that’s what they are doing. Glad to see they are at least open minded enough to read conflicting views, which most on the left today won’t do. It’s telling, though, that they rarely put up substantive comments or want to debate anything on the merits.


I think RNUG was a state employee but not a union member. Willy comes across as a guy connected to trade labor in some way. I would be surprised if he were a government employee, but that’s not to say he doesn’t benefit financially from state and local govt.


They both hide behind fake names, and I am certain they both get state pensions. They are liars who hide behind fake names defending state pensions all day. It doesn’t take Einstein to know they get state pensions.

No one would defend Mike Madigan and the pensions unless they are getting one, and Osretard spends all day doing both.


They both hide behind fake names, and I am certain they both get state pensions. They are liars who hide behind fake names defending state pensions all day. It doesn’t take Einstein to know they get state pensions.

No one would defend Mike Madigan and the pensions unless they are getting one, and Osretard spends all day doing both.


Once the pensions go bust I think Cap Fax will too.


Adam – Our tax dollars subsidize Capitol Fax. The state at one point had a 5-figure payable on the books for Miller’s blog (see below). Many state and local agencies are subscribers at $500/yr, sometimes paying for multiple subscriptions: many school districts, park districts, ISBE, transportation, colleges. I found an entry where Cook County spent $3,000 one year. Even the “Champaign-Urbana Mass Transit District” has subscribed. Why the hell for? I don’t care if PAC money is used, but I’m not sure what value our taxing bodies see in a paid subscription. If there’s any important subscriber info, shouldn’t our… Read more »


Love the comments on that article.

“Taxpayers should not be required to pay for State government employees to read about State government.
In doing so the State is paying a third party to inform the State what the State is doing.”


What discount rate did Moody’s use?

Mike, the discount rate used for plans with fiscal years ending on June 30, 2017 (the data used for Illinois within the Moody’s analysis) was 3.87%. Next year, the rate for Illinois will be 4.14% (for year ending June 30, 2018), so Illinois’ unfunded liability will go down slightly, everything else equal.


What measurement did Moody’s use to select 3.87% as the pension discount rate?

Roughly the same as the long term municipal bond rate?

This gets complicated, but they follow the same rule as for pensions. That is, once the funding level drops below a certain level, then they must use a “blended rate” which is something between the regular rate set by the board (the high, silly rate) and a much lower rate (10-year treasuries, I think). With these being funded at zero, that rule triggers. What’s the rationale behind all that? None that I have ever seen. Seems to me the discount rate for a pay-go OPEB plan should be no more than the inflation rate. We need to dig into this… Read more »

Cass Andra

Accounting standards for retiree health care in the private sector caused many if not most employers to drop retiree health (although some grandfathered in those already retired). The theory in some states (e.g., Michigan) is that its supreme court has held that health benefits MAY be terminated (that is, they are not protected by the contract clause). So the only real promise accounting-wise is for the current year. In Illinois, where the supreme court has held that lifetime health care IS protected by the contract clause, sound accounting principles would look at both medical cost increases, diminishing Medicaid, and longer… Read more »

Illinois Entrepreneur

Given these numbers, why is the state not already rated junk?

What actual numbers will it take to be rated junk? 1000% of revenue? 2000%?

Does anyone think Moody’s has a number, or are they just going to “wing” it until it’s so blatantly obvious that even a soccer mom with a bad Chicago accent like Susana Mendoza can see the writing on the wall?


All good points. I would add one bit of advice for those leaving Illinois. Look at the graphs when choosing a new state. It would be a wasted effort to leave Illinois only to choose another state with a growing pension crisis.

It’s not rated junk because the entire muni bond community is salivating at all the upcoming bond offerings Pritzker has planned, so they are sucking up bigly. Moody’s is better than the others, though.

Tom OConnor

Aha, so Moody’s and the other rating agencies are akin to the fox in the hen house. They are interested in maintaining a steady demand of rated bonds and thus fees to the rating agencies. A junk rated bond/issuer would look for other means to plug the holes. An interesting interview would be Wirepoints pursuing Moody’s with a scenario of what the tipping point would be to result in a junk rating. They probably wouldn’t want to speculate. But they must know… some point it will be obvious the emperor has no clothes.
Keep up the excellent work on this issue.


Don’t ever expect Moody’s or S&P to protect anyone. Don’t even expect the SEC to protect anyone. The credit agencies and I Banks want the underwriting and rating fees, it’s the investors who will get burned.


Do other pensions funds in illinois or elsewhere invest in illinois mini bonds?


The raters manipulate the very things they are rating. Ever rising taxes are rewarded with marketable ratings. The vultures love it when we are kept “just above junk’. As bad as things get funny how we stay “just above junk”. Moody’s… ponzi artist… same thing.


The things said about the rating agencies here are accurate. But remember they are paid by bond issuers – aka Government. Legislation to sponsor a rating agency to evaluate on behalf of tax payers is a great idea, but the vested interests of the elitists and the kleptocrats will keep that from happening. Lest anyone think otherwise, the State is at one notch above junk because even on a yield hungry environment the number of bond buyers would decline precipitously with a junk rating. As I said, I can’t think of any way to short Illinois and it’s debt. A… Read more »