Jim Dey | State's huge public-pension problem growing larger

Jim Dey | State's huge public-pension problem growing larger

Our dedicated public servants in Springfield got some more news this week that they most assuredly don't want to hear.

It comes from the General Assembly's Commission on Government Forecast and Accountability and concerns the state's public-pension woes.

As hard as it is to believe, the report reveals — once again — that when serious problems are ignored, they get worse instead of magically disappearing. Talk about unfair.

For months now, news outlets writing about underfunded public-pension funds have reported that Illinois' five funds are underfunded to the tune of $130 billion. It represents a huge financial Sword of Damocles hanging over taxpayers' heads.

That $130 billion figure was rounded up from the specific figure of $128.86 billion. That was for the 2017 fiscal year.

The commission reports there's a new figure for fiscal year 2018, which ended June 30. Now, the state's pensions are underfunded by $133.68 billion.

"The primary reason for the increase was, again, actuarial insufficient state contributions, which increased the unfunded liability by $3.187 billion, accounting for 66.1 percent of the total increase," its report states.

Here are a couple of other numbers to chew on:

Ten years ago — in fiscal year 2008 — the total unfunded liability was $54.4 billion.

Ten years from now — in fiscal year 2028 — the total unfunded liability is estimated to be $145.9 billion.

If readers still have an appetite for more numbers, consider this: For the current fiscal year 2019, the state contributed $8.5 million in taxpayer funds to the five pension funds for state legislators, judges, teachers, state employees and university retirees. At the same time, employees contributed another $1.5 billion.

That's a total of $10 billion made available for investments, and the result is another increase in underfunding from $133.68 billion to $136.888 billion.

In other words, the more the state is putting in, the further it is falling behind, because legislative funding mandates — huge though they are — are still not enough from an actuarial standpoint to keep even, let alone increase funding levels.

Now further consider that the state's $8.5 billion contribution to the pension funds is a part of its current roughly $38 billion budget — 21 percent-plus.

To those who wonder why there's not enough money for schools, roads, mental health and law enforcement, the answer is that those needs are being crowded out by pensions as well as Medicaid spending.

Gov.-elect J.B. Pritzker has an idea for a partial solution, one he borrowed from the Center on Tax and Budget Accountability.

He's considering issuing pension-obligation bonds — in other words, borrowing — and using the proceeds for stepped-up contributions.

But Eric Kim of Fitch Ratings views the move skeptically, noting that the state's credit rating is already just two notches above "junk" status.

Depending on how the move is engineered, Kim said it would range from "a credit negative" to "deficit financing."

Illinois has tried that approach before, during the early years of the first administration of former Gov. Rod Blagojevich.

The state issued $10 billion in pension-obligation bonds that "generated $7.3 billion to reduce unfunded liabilities" in the pensions.

That was a bold but ultimately futile step, because governors and legislators failed to stay on top of the problems.

After the $7.3 billion bond contribution in fiscal year 2004, pension underfunding stood at about $35 billion. Now it's nearly four times that amount.

These numbers are enough to make the heads of ordinary citizens spin. Most people know they represent trouble, but how much is hard to say.

But it's enough that legislators have preferred to let matters continue to get far worse than do something about them. After all, from their perspective, when the state is that far in the hole, what's a few more billion dollars?

Jim Dey, a member of The News-Gazette staff, can be reached at jdey@news-gazette.com or 217-351-5369.

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