Illinois Pensions in a Fiscal Context: A (Basket) Case Study
Illinois’ public pensions are among the worst funded in the nation. We present evidence that the main reason for Illinois' underfunding is a history of making inadequate contributions, dating back to the origins of the state's pensions. We discuss the recent history and legal status of pension reform efforts in the state. Using a fiscal model of the state's finances, we project how Illinois' fiscal situation may evolve in the future. A key finding is that with or without pension reform, Illinois will continue to face significant structural deficits that will require revenue increases and/or additional spending cuts to address.
We are grateful to John Shoven, Eric Madiar and participants in the 2015 NBER conference on Retirement and Health Benefits in the Public Sector for helpful comments. Disclosure: Brown is a Trustee for TIAA, a financial services company that provides retirement plans to the not-for-profit and government sectors. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.