Illinois pensioners are facing a haunting reality this Halloween: pension funds are suffering from a 50% under funding burden that is weighing heavily on local and state government budgets. Bond Buyer reports in just one-year public pension liabilities grew by over $17 billion between fiscal year 2015 to 2016.
Illinois published a report by the Public Pension Division of the Illinois Department of Insurance that provides a comprehensive analysis of the 671 public pension funds in the state. The results are as frightening.
The pension-funding deficit effects more than just the pensioner’s financial future but also Illinois’ future access to credit. Moody’s downgraded the 15% of the Illinois portfolio and cited pensions are the primary reason. Moody’s analyst David Levett noted, “Among cities we’ve downgraded, pensions have been the primary ratings driver.” This should come as no surprise.
The small General Assembly is only funded at 15%, and while this is an example of an exceptionally low, the pension funds for Illinois’s first responders are not far better. The Chicago police fund is funded at 28.2% and the firefighters have a funding level of 23.4%. In total, of all of the large pension funds in Illinois, only five receive funding levels above 50% – none of which exceeds 60%.
Illinois will soon battle for access to capital markets if its bonds continue to be downgraded. Pension liabilities are bad for the future of Illinois and the financial future of Illinois’s pensioners.