Report: Illinois owes most for pensions

April 26, 2011 6:35:10 AM PDT
A new report shows Illinois trailing every other state in the country at covering future pension costs.

The Pew Center on the States found that Illinois set aside only 51 cents for every dollar it has promised to pay out. Other states owed more to their retirement systems in raw dollars, but none matched Illinois in percentage terms.

The closest was West Virginia, which had 56 percent of the money to cover its long-term costs.

Experts often recommend states build up assets worth 80 percent of their future pension costs.

Illinois state government has frequently failed to make its full contribution to retirement systems. In some years, it didn't make any contribution at all. At the same time, it continued promising more benefits to retirees. The result has been a huge gap between the money available to invest and the amount that will have to be paid out in decades to come, particularly as Baby Boomers retire.

Skimpy payments in the past mean Illinois now faces even bigger payments to catch up. Pension costs in the next budget are $4.2 billion, or nearly two-thirds of all the money Illinois will take in from the recent income tax increase.

There is no danger that pension checks will stop going out, but eventually Illinois will have to come up with billions of dollars or find a way to reduce pension costs.

Already, the state has cut benefits to future employees. Some officials want to do the same for people already on the state payroll.

The report, "The Widening Gap: The Great Recession's Impact on State Pension and Retiree Health Care Costs," looked at figures from fiscal 2009, when the economy and stock market were at their worst.

Illinois had $126.4 billion in pension liabilities, and assets worth just over half that amount.

California owed far more, $490.6 billion, but had assets totaling 81 percent. New York owed $146.7 billion but actually had more money than it owed -- a 101 percent funding level.

(The Associated Press contributed to this report.)