The Illinois Auditor General released a report last week which confirmed that the unfunded liability in the state’s retirement systems ballooned by nearly $12 billion in fiscal year 2012.
The audit also finds three of the five systems out of compliance for leaving an internal auditor position vacant for six months. As a result, only one of the eight internal audits for the year were completed in the state employees, judges and General Assembly retirement systems.
Our Executive Vice President, Kristina Rasmussen, appeared on ABC 20 last week to discuss the report.
The state’s five public pension systems owe a combined $94.6 billion. That’s up 14% from the $82.9 billion reported last year. Worse yet, none of the pension systems have enough assets on hand to pay benefits to those who have already retired, let alone those still working.
Of course, these official numbers use many accounting gimmicks that will be prohibited under the new rules adopted both by the Governmental Accounting Standards Board and by Moody’s Investors Service. Under those new accounting rules, which will gradually take effect during the next few years, Illinois’ pension debt will grow to more than $209 billion.
The simple fact is that the state’s pension funds are broke. Pension experts and the state’s own actuaries agree: the pension funds could soon be insolvent. Merely tinkering at the margins, as this year’s various so-called pension reform proposals would do, can’t solve this crisis.
Without real reform, pensions will continue to crowd out funding for core government services, such as education. And the longer lawmakers delay action, the worse Illinois’ pension debt crisis will become. Legislators can’t ignore the math any longer. Only major reforms, like those centered on defined contribution plans and those tackling the automatic cost-of-living adjustment, can get the problem under control.
Jonathan Ingram
Director of Health Policy and Pension Reform
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So the answer to debt problems is just refuse to pay what you owe? Pensions are contractual obligations. They must be paid in full. Either raise taxes or cut other spending that is not contractually guaranteed. Inconvenient? Yes. Impossible? No.
Way too late Andrew. Nobody funded the pensions, except with a tax increase. The economy keep the funds rate of return low. The state wants to push pensions to the local level so they can declare bankruptcy, the state can’t. Illinois has the highest percent of people leaving the state. Raise taxes more, it will go even higher. Saying unions have a contract is meaningless.
That’s billion not million in the headline
Scary, thanks!