Nationwide analysis from the Equable Institute reveals Illinois state pensions remain fiscally unstable, underscoring the need for systemic reform.
By LyLena Estabine | Illinois Policy Institute
The urgency and severity of Illinois’ pension crisis is undeniable when compared to the rest of the nation. Reports from the Equable Institute found Illinois lags in both pension funding and performance compared to other states at the end of fiscal year 2024.
If the state fails to fix its pension issues, the budget will continue to be strained, people will continue leaving the state and future pension benefits could be at risk.
Preserving the cost savings of Tier 2, offering retirement choice to state employees and constitutional pension reform should all be seriously considered by policymakers if Illinois is to have any hope of fiscal sustainability.
Illinois pensions maintain title as nation’s worst-funded
When it comes to the funded ratio, or how much money the government has on hand compared to how much it owes pensioners, Illinois ranks dead-last among all other states for the second year in a row. It’s also one of only four states remaining below 60% funding.
This underperformance persists at the individual pension system level as well as statewide. Illinois has four of the 10 worst-funded state-level public pension systems in the nation, the most out of all other states.
In comparison, New Jersey, the state with the third lowest funded ratio in the nation, has three of the worst-funded systems. Arizona, Kentucky and California each have one. Illinois’ pension situation has worsened since 2023, when it only had three of the lowest funded state pension systems. This year, the Illinois State Universities Retirement system joined the list, and Illinois’ other underfunded state pensions dropped further in the rankings, by about three places each.
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