CHICAGO Jan 21 A reform package passed late
last year will make improvements to Illinois' woefully
underfunded public pension system, but the state's budget gap
still will increase to $13 billion by 2025 if current policies
remain in place, according to an independent analysis released
While the pension reforms are expected to save Illinois $160
billion over 30 years, they will reduce the state's structural
budget deficit only by $1 billion to $1.5 billion a year over
the next decade, according to the report by the Institute of
Government and Public Affairs at the University of Illinois'
Fiscal Futures Project.
That would leave the state with a projected budget gap of $3
billion in 2015, growing over the next 10 years to $13 billion.
The projected shortfall is just $1 billion less than the $14
billion deficit the report projects Illinois would face without
"The pension revision law of December 2013 was a huge step
in the direction of fiscal stability for Illinois," the report
said. "Unfortunately, the state's fiscal problems are so great
that much still remains to be done."
The report assumes that the pension changes will take effect
in June and that a significant increase in income tax rates,
enacted in 2011, will be allowed to partially expire when 2015
However, state retirees and others have filed class-action
lawsuits that seek to stop the law on the grounds that the
Illinois constitution prohibits impairment of public worker
retirement benefits. The litigation could push back the law's
implementation and possibly void it, forcing state lawmakers to
find another way to tackle a $100 billion unfunded pension
As for the income tax hikes, the report said lawmakers could
vote to make them permanent. If that and implementation of the
pension reform law both happen, the state budget deficit in 2025
would come in around $5.5 billion, the report estimated.
The state's own projections disagree with those published in
the report. The report foresees a $3 billion deficit in the
state's general funds for 2015, while the state budget office
projects the $37 billion budget will show only a $1.9 billion
The comprehensive pension reform law was a critical step to
returning Illinois to sound financial footing, said Abdon
Pallasch, the state's assistant budget director.
"As the three-year projections posted Jan. 1 show, the state
faces a challenge with the expiring revenue to develop a
solution that will allow the state to continue to pay down its
bills and protect education and public safety services from
radical budget cuts," he added.
Under the pension reform law, cost-of-living increases for
retirees' pensions will be reduced and suspended, retirement
ages will be increased and salaries on which pensions are based
will be capped.
The state's failure to tackle its pension funding problems
led credit rating agencies to pound Illinois' bond ratings to
the lowest levels among states. Meanwhile, Illinois plans to
sell its first tax-exempt bonds since passing pension reform.
The $1 billion of general obligation bonds are scheduled to be
priced through Citibank on Feb. 6.