Despite the state making supplemental contributions, a credit rating agency says Illinois’ “poorly funded” pensions will continue to stress state and local government budgets as the state sees “weak demographic trends” and “shrinking population.”
S&P Global Ratings published their “Pension Spotlight: Illinois” report Monday. In announcing the report, the agency said it “expects costs will keep rising because contributions are significantly short of meaningful funding progress, plans are poorly funded, and the Illinois Pension Code allows plans to use assumptions and methodologies that defer costs.”
The report says the burden on state spending comes regardless of efforts to reduce costs, buy out liabilities and contribute more than what was statutorily required. The fiscal year budget that begins July 1 contributes a total of $10 billion to pensions, or around 1 out of every 5 dollars of taxes the state brings in.
“[F]ixed pension costs related to the five state-sponsored plans … are projected to increase at an annual average rate of more than 2.2% over the next 10 years,” the report said. “With the additional payments from the pension stabilization fund, the state will have contributed an additional $700 million to the five state-sponsored plans. However, contributions are still short of an amount we consider indicates funding progress.”
The Illinois Auditor General pegs Illinois’ unfunded pension liability at around $140 billion. All five state funds combined are 42.4% funded.
More here.
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