Reason Foundation: No turning point yet in Illinois on pension debt

By Jim Talamonti | The Center Square
The Center Square

(The Center Square) – A new report says Illinois has the highest per-capita unfunded state and local pension liabilities in the nation, 50% higher than the state with the second-highest pension debt.

Reason Foundation reviewed over 300 public pension systems and found that Illinois leads the nation with over $15,000 per capita in unfunded state and local pension liabilities.

Connecticut was next with $10,000 per capita in pension debt at the end of the 2024 fiscal year.

Ryan Frost, managing director of the Pension Integrity Project at Reason Foundation, explained the difference between Illinois and other states.

“I would say the main difference between the rest of the country and Illinois is that there hasn’t really been a turning point yet in Illinois like most other states who have managed to at least implement some reforms to their plans to cap the growing debt problem,” Frost told The Center Square.

In terms of total unfunded liabilities, Reason Foundation’s Annual Pension Solvency Report found that Illinois had $200.87 billion in state and local public pension debt, second only to California’s $264.71 billion.

Frost said California, unlike Illinois, implemented reforms to cap unfunded liabilities. California Gov. Jerry Brown signed the reform legislation in 2012 and it took effect in January 2013.

Illinois’ neighboring states are faring far better.

Iowa ($1,328), Wisconsin ($1,444) and Indiana ($1,670) rank in the top 10 for lowest per capita unfunded pension debt. Missouri has $3,329 in unfunded liabilities and Kentucky has $8,626.

“Kentucky, for example, they mostly eliminated their pensions for almost every worker in Kentucky starting a few years back, so they’ve somewhat capped the oil spill there in their state,” Frost said.

Frost said states like Illinois and New Jersey have not reformed and are still passing benefit improvements for public employees.

The Reason Foundation report found that the Illinois Teachers Retirement System has $83 billion in unfunded liabilities, second-highest of any pension plan in the nation.

Frost said there is only one way out for a plan has been poorly run for so long.

“The taxpayers are going to have to keep paying 50 to 60% of every teacher’s pay just towards paying off that pension unfunded liability,” Frost said.

Frost said almost every public pension plan in Illinois is ranked near the bottom.

Nationwide, 47 of the 50 states had at least some public pension debt at the end of 2024. The exceptions were Washington, Tennessee and South Dakota.

Frost added that arguments against pension reform often involve recruitment and retention. He said Reason Foundation found that pensions have basically zero impact on the recruitment and retention of public employees.