CHICAGO (Reuters) - Illinois’ already huge unfunded pension liability grew bigger in fiscal 2018, rising to $133.5 billion from $129 billion at the end of fiscal 2017 mainly due to inadequate state funding, according to a legislative report released on Friday.
The state legislature’s Commission on Government Forecasting and Accountability also projected the liability would increase to $136.8 billion when fiscal 2019 ends on June 30 and reach $139 billion in fiscal 2020.
Mostly due to a low pension funded ratio, which stood at just 40.2 percent in fiscal 2018, and a chronic structural budget deficit, Illinois has the worst credit ratings among the U.S. states at a notch or two above the junk level.
J.B. Pritzker, a Democrat who defeated current Republican Governor Bruce Rauner in November’s gubernatorial election, will inherit the pension problem when he takes office in January. He has assembled a 17-member committee to address fiscal issues, including pensions.
The legislative commission said the state continued to short-change its pension funds in fiscal 2018.
“The primary reason for the (unfunded liability) increase was, again, actuarially insufficient state contributions, which increased the unfunded liability by $3.187 billion, accounting for 66.1 percent of the total increase,” the report said.
Other contributors to the increased liability were demographic factors at Teachers’ Retirement System and State Universities Retirement System’s lowering of its assumed investment rate to 6.75 percent from 7.25 percent, the commission said.
It projected that Illinois’ contribution to its five retirement funds would increase by 8 percent to $9.22 billion in fiscal 2020, which begins on July 1, from $8.54 billion this fiscal year.
A provision in the Illinois Constitution protecting existing retirement benefits for public sector workers has made cost cutting difficult.
While the state has reduced benefits for new workers, implementation of its latest plan to save about $400 million in the current budget through a voluntary buyout of pension benefits has been stalled.
Reporting by Karen Pierog in Chicago; Editing by Matthew Lewis