Watching Pensions Collapse
A brand-new essay from Illinois Policy related to the status of Illinois pensions was released today.
Beware: this is ugly....... so, so ugly.
Illinois has the worst pension crisis in the nation, an ugly reality that is aggravated by the state’s sunny projections that things aren’t quite as bad today and won’t be as dire tomorrow as the numbers reveal.
During the past decade, the state consistently underestimated how fast pension costs and pension debt would grow in the future. That left taxpayers on the hook for $7.6 billion in unexpected costs. It also left social services on the chopping block and some policymakers with the impression that the pension problem could simply blow over.
Most of all, these flawed numbers have allowed Illinois’ political leaders to continue making promises they cannot keep while ignoring a pressing need for reform.
Pension costs have overwhelmed the Illinois budget and swallowed up spending on core government services. Pension contributions now consume over 25% of the state’s general funds budget, up from less than 4% during the years 1990 through 1997.
State spending on public pensions has increased by more than 500% during the past 20 years, after adjusting for inflation. All other spending, including social spending for the disadvantaged, was down 32% since 2000.
Unfortunately, the state’s pension hole is likely even deeper than the state admits.
Moody’s Investors Service calculated Illinois’ pension debt is not $137 billion but much higher at $241 billion. A key difference is Moody’s uses more conservative investment return assumptions similar to what are used in the private sector, around 4%, compared to the state-run plans that assume 6.5% to 7% returns.
Based on the Moody’s number, Illinois’ pension debt was equal to 500% of the state’s revenues in fiscal year 2018and almost 30% of the entire state economy, both the highest rates in the nation. If Illinois used more realistic assumptions, it would need to double the amount it spends on retirement benefits annually to 51% of the state’s revenues, according to Michael Cembalest, an expert at J.P. Morgan.
Those are just a few excerpts of the great (??) expository.
ILLINOIS’ PENSION COSTS, DEBT ARE GROWING FAR FASTER THAN STATE PREDICTED
Bill Reveille
https://www.illinoispolicy.org/illinois-pension-costs-debt-are-growing-far-faster-than-state-predicted/
Years and years and years of mis-management, poor planning, and delayed response have made this a nearly-impossible situation to resolve.
A total collapse is getting nearer and nearer each month. Those who are counting on these pensions are gonna get screwed.
Grace & Peace & Love to you all -
Matt
