Posted by Bob Secter at 11:00 p.m.
No state has done worse than Illinois in setting aside funds to pay the pension and health care benefits promised to retirees in public sector jobs, according to a study released today by the Pew Center for the States.
That dubious distinction bestowed by the non-partisan Washington-based think tank weighs heavily over Illinois’s current budget mess that has left Gov. Pat Quinn and lawmakers with a coming record $13 billion deficit in the state’s main checkbook to try and close by summer.
The Pew report found that states collectively are $1 trillion in arrears in setting aside funds to cover pension and health care promises to current and future retirees — and nearly one-tenth of that total was from Illinois alone.
“The growing bill coming due could have significant consequences — higher taxes, less money for public services and lower state bond ratings,” warned Susan Urahn, the Pew Center’s managing director.
That day of reckoning appears fast approaching. The state’s bond ratings already are crashing and pension costs, if fully met, could top $5 billion next year — nearly one-fifth what the state is spending to fund day to day operations in the current fiscal year.
The Pew report found that as of the mid-2008, Illinois had funded just 54 percent of what was then a $119 billion obligation to its public employee pension funds. And that may understate the problem. A more recent estimate from the legislature’s bipartisan fiscal watchdog agency pegged the funding ration at a hair under 50 percent by the end of last June.
Pew also said that Illinois had set aside less than 1 percent of the funds it need to pay for $40 billion in health care and other benefits promised public sector retirees.
Despite the recession, Urahn said Illinois and other states with huge pension and health care debts will only make the situation worse by not addressing it now.
“The future fiscal burden will be enormous,” she said. “Postponing a solution will only leave states and their taxpayers in worse shape and lead to higher taxes or cuts in important services.”