Illinois’ rising debt and high unfunded pension obligations will get worse due to a costly deal between the AFSCME union, which helps elect Democrats to office, and Democratic Governor J.P. Pritzker of Illinois. Center Square reports:
The state of Illinois reached a new contract agreement with members of the AFSCME union that will cost taxpayers an additional $620 million over four years.
Gov. J.B. Pritzker on Tuesday announced the agreement with the American Federation of State, County and Municipal Employees. The state’s previous contract with the union expired at the end of June.
The $620 million in additional costs amounts to a raise of nearly 18% ….
Bryce Hill of the Illinois Policy Institute told The Center Square a deal this large could have unfavorable consequences on the state’s taxpayers.
“The AFSCME contract is more generous than what taxpayers can afford,” Hill said. “It’s increasing faster than total personal incomes in the state. It is increasing faster than hourly wages in the state. It’s increasing faster than average weekly earnings. So on virtually every metric, the private sector wage increases are not keeping up with this contract, which means taxpayers are going to see a larger share of their paycheck going towards subsidizing these pay raises.”
“Illinois’ public pensions are worst funded in U.S.,” notes the Illinois Policy Institute:
Illinois ended the 2023 fiscal year with an estimated $429 billion in pension liabilities but only $218 billion worth of assets, leaving the state with $211 billion in unfunded state and local pension liabilities. The pension systems’ collective funding ratio of 50.8% was the lowest in the nation. Experts warn pensions with funding ratios below 60% are deeply troubled….
Illinois’ unfunded liabilities as a percentage of its gross domestic product – a proxy for a state’ ability to pay – stand at 21%, by far the worst figure in the nation. It was nearly five percentage points higher than the second-worst figure of 16.2% in Kentucky. Forty-two states had unfunded liabilities as a percentage of GDP lower than 10%….
Not only are Illinois’ pension systems most likely to default, the state has the lowest capacity to pay the debt compared to other states….three of Illinois’ five state-run retirement systems were among the 10 worst-funded systems in the nation. Last year’s pension report showed two Illinois systems in the bottom 10 nationally, the State Employees Retirement System and Teachers Retirement System. This year, the Judges Retirement System joined them among the worst-funded systems in the nation.
Bloomberg News reported in December that the “unfunded pension liability across Illinois’s five retirement systems rose 7.5% to $139.7 billion in the fiscal year that ended in June, based on the market value of their assets, according to a report from the Illinois Commission on Government Forecasting and Accountability on Thursday.”
