The Source of Illinois Unfunded Liability
At more than five times the national average,
Illinois has the largest unfunded pension liability in the nation.
Why?
Debt ($ in billions)
Figure 1
Illinois Retirement Debt
$50
$40.7
$40
$30
$20
$7.2
$10
$Illinois
National Average
Not due to overly generous benefits.
Illinois benefits are just 3.7 percent more than the national average.
Figure 2
Average State & Local Government Employee Annual Retirement Benefits
AverageAnnual Paym
ents
$20,000
$19,000
$18,000
$17,000
$17,112
$16,488
$16,000
$15,000
$14,000
$13,000
$12,000
$11,000
$10,000
National Average
Illinois
© 2007, Center for Tax and Budget Accountability
Not due to costs.
Illinois costs are far below national averages.
Normal Cost (percentage of active
members' payroll)
Figure 3
Comparison of Pension Systems Normal Costs
14.00%
12.5%
12.00%
9.13%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
Illinois
National Average
Why then? Illinois' fiscal problems can be traced to one very simple phenomenon: while the cost of providing public
services grows normally with the economy over time, the state’s poorly designed tax system does not grow with the
economy, and hence generates less revenue than needed to maintain current public service levels and make the required
pension payments from year to year, adjusting solely for inflation. Because Illinois tax revenues haven’t grown with the
economy for decades, Illinois has repeatedly underfunded its retirement systems, just to maintain basic services.
The harsh reality is the state has not gone into debt to fund public employee benefits. Quite the opposite. Illinois has
borrowed against the pension contributions it owes to maintain public services. What Illinois suffers from is a structural
deficit, the inability of a tax system to generate enough revenue to maintain funding the same level of public services from
year to year.
Figure 4
The Illinois Structural Deficit
(How Revenue Growth Will Not Keep Pace With The Cost of Current Services)
$49 Billion
Revenue
Expenditures
$44 Billion
$39 Billion
$34 Billion
$29 Billion
© 2007 Center for Tax and Budget Accountability
$24 Billion
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20
20
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20
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20
20
20
20
26
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07
06
For more information, contact Jourlande Gabriel, IRSI Director, (312) 332-1103 or jgabriel@ctbaonline.org.
© 2007, Center for Tax and Budget Accountability