|Illinois’ growing retirement debt is largely due to a jump in the state’s unfunded pension liabilities. The state’s pension debt grew by almost $50 billion – or more than 56 percent – between 2010 and 2016. That growth occurred despite the massive cash infusions of more than $40 billion state taxpayers paid into the pension funds over that period.
Illinoisans are also on the hook for over $56 billion in unfunded retiree health care liabilities.
Illinois must stop creating more pension debt
There’s little that can be done immediately to reduce the amount of retirement debt Illinois has already incurred, barring bankruptcy, major concessions from the unions, or changes to the Illinois Constitution.
The $267 billion will have to be paid down over time just like any other debt.
But as long as Illinois’ retirement systems continue to create new pension liabilities, the state will continue to create more and more pension debt.
That’s not sustainable for taxpayers, government workers or the state itself.
Moving away from pensions – and thereby stopping the growth in new pension debt – is essential.
Illinois can do that by moving new workers into 401(k)-style plans, and by giving existing workers the option to move to 401(k)s as well.
At present, that’s the only constitutional way to begin an end to Illinois’ pension crisis.
The state can transition from pensions to 401(k)-style plans as new workers are hired and older workers retire. As time passes, the threat of skyrocketing pension debts will decline.
The good news is Illinois doesn’t have to look beyond its borders for a successful 401(k)-style plan to emulate.
Since 1998, more than 20,000 state university workers in Illinois have been able to opt into a 401(k)-style plan instead of the traditional pension plan. Illinois’ lawmakers can begin to solve the pension crisis by simply expanding that 401(k)-style option to all state workers.
If they don’t, Illinois households can expect to owe even more than $56,000.