SPRINGFIELD — A report released Monday shows Illinois has the nation’s worst record on supporting government retirement funds, setting aside only 51 cents for every dollar it has promised to pay out.
Other states owed more to their retirement systems in raw dollars, but none matched Illinois in percentage terms, according to the Pew Center on the States. The closest was West Virginia, which had 56 percent of the money to cover its long-term costs.
Experts often recommend states build up assets worth 80 percent of their future pension costs.
Illinois state government has frequently failed to make its full contribution to retirement systems. In some years, it didn’t make any contribution at all. At the same time, it continued promising more benefits to retirees.
The result has been a huge gap between the money available to invest and the amount that will have to be paid out in decades to come, particularly as baby boomers retire.
Skimpy payments in the past mean Illinois now faces even bigger payments to catch up. Pension costs in the next budget are $4.2 billion, or nearly two-thirds of all the money Illinois will take in from the recent income tax increase.
There is no danger that Illinois’ retired teachers, state employees and university staff will stop getting their pension checks. But the state eventually will have to come up with billions of dollars or find a way to reduce pension costs.
Already the state has cut benefits to future employees. Some officials want to do the same for people already on the state payroll.
The report, “The Widening Gap: The Great Recession’s Impact on State Pension and Retiree Health Care Costs,” looked at figures from fiscal 2009, when the economy and stock market were at their worst.
Illinois had $126.4 billion in pension liabilities, and assets worth just over half that amount.
California owed far more, $490.6 billion, but had assets totaling 81 percent. New York owed $146.7 billion but actually had more money than it owed — a 101 percent funding level.
The Pew Center report concluded it was bad decisions and a sour economy that combined to leave 31 states below the safety line set for investing money to meet future pension costs.
The double whammy also has increased the chance that officials may eventually have to fix the problem by cutting benefits or raising taxes.
Twenty-two states failed to previously meet the 80 percent funding threshold, and nine more fell short in fiscal 2009, according to the Pew Center on the States.
“Far too many states are not responsibly managing the bill for their employees’ retirement,” said the report.
But Keith Brainard, research director for the National Association of State Retirement Administrators, said it can be misleading to look at a percentage at any one moment. Markets rise and fall, states put more money or less into pensions, and benefits can be adjusted up or down.
He called the funding percentages “a snapshot of what amounts to a decades-long motion picture. There’s nothing magical about any particular funding level.”