Illinois' Pension System: Woefully Underfunded, Scandal-Plagued

By almost any measure, the Illinois government pension system is the nation's worst, plagued by debt and scandal.

• Lawmakers in 2005 agreed to divert some $4 billion of scheduled pension fund payments to other spending through 2010, including a combined $2.3 billion in 2005 and this year.
• Blagojevich appointed the Governor's Pension Commission in 2004 to study the state's pension system and recommend improvements. The 13-member commission's recommendations went largely ignored by the governor and lawmakers.
• The state issued $10.1 billion in pension obligation bonds in 2003 to reduce unfunded liabilities. The borrowing is a gamble because the state must repay the money with interest over 30 years. To do this without turning to taxpayers, the state will have to earn average annual returns on investments that exceed the 5.05 percent interest rate on the obligation bonds. There is no guarantee that will happen.

Despite the infusion of borrowed money, the state's unfunded pension liability stands at an estimated $38 billion, the largest unfunded liability in the nation, according to State Sen. Bill Brady (R-Bloomington), who served on the Governor's Pension Commission.

Steve Stanek of the The Heartland Institute (whose mission is "to discover and promote free-market solutions to social and economic problems") argues, "The only reform that promises to genuinely fix the state's public pension crisis is a transition from defined benefit to defined contribution plans."

The unions hate that.

Updates here and here.