Fitch Ratings reviewed pension funds for public employee retirees from every state. “In aggregate, states had $924 billion in Fitch-adjusted [net pension liabilities] as of state fiscal 2023 audits,” the report said. “This was up 21.2 percent from the $762 billion reported last year, as post-pandemic asset values surged, but it remained below the $1 trillion level reached in fiscal 2021.”
The report found Illinois’ unfunded pension liability, when including other post employment benefits, is $206.5 billion.
“The median ratio of direct debt to personal income measured only 1.8 percent in fiscal 2023, below the 2 percent level in fiscal 2022,” the report said. “Since fiscal 2016, when the median was 2.3 percent of personal income, the burden of state direct debt has been flat to declining.”
The ratings agency’s recent report has the long-term liabilities for Illinois making up 22.8 percent of the state’s personal income, the second worst in the country behind Connecticut.
Illinois was singled out several times in Fitch’s report as being among states that didn’t have the most recent comprehensive annual report and for having a magnitude of post employment benefits with high legal barriers for a state to modify benefits.
Democratic state Sen. Robert Martwick is chairman of the Illinois Senate’s pension committee. He said it’s not surprising Illinois’ pension debt is among the worst in the country in Fitch’s report. Fixing it means addressing many issues, he said. Diminishing benefits isn’t in the cards.
“The constitution in Illinois prohibits unilateral pension benefits and to be fair I agree with that,” Martwick told The Center Square. “I don’t think the way to save money is to punish people that did nothing wrong.”
State GOP Rep. Blaine Wilhour is on the House committee dealing with pensions and said things have to change. And the first thing is to not make it worse.
“There’s a huge push going on in Springfield right now,” Wilhour said. “The public sector special interests are rallying here to basically make Tier II into Tier I.”
Legislators have been discussing enhancing benefits for employees hired after 2011. The push is to bring the Tier II benefits in line with Social Security equivalent retirement guidelines.
Martwick said they have to fix it because the cost of making good along with any subsequent penalties after the fact would be more expensive for taxpayers.
“It’s gonna happen and the cost is a moving target because of course there are different ideas on what that should look like,” Martwick said.
Martwick said Gov. JB Pritzker has made his pitch. The labor unions have made theirs.
“I believe over the course of the next six to seven months, we will have a lot of hearings and negotiations and see if we can land that plane on something that satisfies both ends,” Martwick said.
Wilhour said increasing benefits goes in the wrong direction of making progress in paying down the liability.
“But as they generally do in Springfield, they make it worse because they’re more worried about buying votes than they are in protecting the citizens of this state,” Wilhour said.
Fitch’s report has Connecticut’s $74.9 billion in debt at 23 percent of personal income as the worst. The best state was Tennessee with $4.4 billion at 1 percent of personal income.
This article was originally published in The Center Square. Read the original article.
