There are two things that happen when Illinois’ pension problem gets brought up in my presence.
I start talking.
Everyone in the room’s eyes glaze over.
Some old friends have been known to cross the street when they see me coming.
Little babies start to cry.
I can’t quit it.
Crain’s and the Better Government Association provide a remarkably clear explanation of the root of the problem and the current situation.
The median pension in 2017 for retired suburban and Downstate teachers stands at $52,016, the analysis shows, while the median for general state workers is $28,946. For university workers, the median pension stands at $26,101, while for non-public safety municipal workers outside of Chicago it is $9,064.
- Just five of the 17 pension funds—those managed by the state for public university workers, suburban and Downstate teachers, general state employees, judges and legislators—collectively face an unfunded liability of $130 billion.
A recent analysis by the legislature’s economic forecasting arm, a bipartisan body akin to the Congressional Budget Office, vividly illustrates the central role played by the state’s chronic failure to meet its pension funding obligations in the explosion of debt at those five state funds.
TRS, the largest of the state’s pension funds, possessed more than $45 billion in assets to cover its pension obligations in fiscal 2016, according to data from the legislative commission. Even so, the commission pegged the cost of long term pension obligations at the fund at more than $118 billion, resulting in a funding ratio of just 37 percent.
- As a rule of thumb, pension experts generally consider a pension fund healthy if it has on hand at least 80 percent of the financial resources it needs to cover future obligations to retirees. There are some exceptions, but most big pension funds in Illinois are nowhere close to meeting that benchmark, with many in the sub 40 percent category.
In fiscal 2016 alone, the state obligation to TRS and the other four employee pension funds it maintained was $6.8 billion, an amount so large it consumed more than 26 percent of the day-to-day operations budget of Illinois government, according to Ralph Martire, executive director of the Center for Tax and Budget Accountability.
But Martire said only $1.6 billion of that amount, less than 24 percent, was needed to cover the so called normal cost of pensions, benefits actually earned by employees in 2016. The other $5.2 billion amounted to late payment charges.
“The real problem is a debt-service problem and a tax-policy problem,” said Martire, whose Chicago-based think tank contends Illinois finances are being crippled by insufficient taxes.