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State taxpayer liability for pensions increases $3.5 billion despite paying more into funds

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Friday, December 6, 2019  |  Article  |  By Greg Bishop | The Center Square

Governor (44) , Pensions (70) Sosnowski, Joe--State House, 69 , Steans, Heather--State Senate, 7
Despite putting more tax dollars into the state’s five pensions funds, Illinois' unfunded liability continues to increase.

The Commission on Government Forecasting and Accountability reported the unfunded liability for the state's five public sector pensions stood at $137.3 billion. State Rep. Joe Sosnowski, a Rockford Republican on the commission, said that’s up more than $3.5 billion from last year despite taxpayers putting more into the funds.

“We have huge payments that we’re putting into the pensions that go up almost a billion dollars a year,” Sosnowski said. “We can’t keep up with that.”

In 2005, Illinois had $38.6 billion in unfunded liabilities and the pension systems were 60 percent funded. In 2014, those liabilities grew to $104.6 billion while the systems slipped 42.9 percent funded.

“The unfunded liability grew to $137.3 billion during FY 2019, largely due to the continued actuarially insufficient state contributions and lower-than-expected investment returns,” the COGFA report said, noting the pension funds are now 40.3 percent funded.

In the spending plan lawmakers approved this summer, taxpayers paid $9.2 billion into the pension systems from a $42 billion state budget. The projected contribution for the next fiscal year is $9.8 billion. COGFA projects by 2025, taxpayers will pay $10.9 billion. By 2045 the projected taxpayer contribution would be $19.2 billion.

The higher costs, Sosnowski said, will lead to service cuts or calls for tax hikes.

“All of our other money is going toward benefit packages,” he said. “We’re not able to do our core functions."

Sosnowski said the unfunded liabilities don't include taxpayer-subsidized health care benefits for state retirees. He said he would consider filing a constitutional amendment to reduce such costs.

“We have got to be able to have some flexibility where, in the constitution we could even put it, where there has to be a copay for healthcare and again that would help the state quite a bit,” Sosnowski said.

Commission member state Sen. Heather Steans, D-Chicago, said the growing unfunded liability was a clear call to action and implored the governor and legislative leaders to take up the issue. She suggested reviewing the pension contribution ramp and reevaluating a pension reform model that gives retirees choices as a way to comply with the state constitution's pension-protection clause.

Steans said an amendment to the state constitution's pension protection clause to allow for benefit reductions wouldn't be popular – or realistic.

“It’s certainly something to be looked at,” Steans said. “I think that thinking that that’s going to pass in the legislature is not very realistic.”

Gov. J.B. Pritzker has also said a constitutional amendment to change pensions was unlikely to pass. Sosnowski said voters should get to decide.