Another year, another serious problem for the State of Illinois

The Illinois pension crisis just got much worse.

According to reports, the state’s unfunded pension liabilities jumped $3.8 billion to $137.3 billion at the end of the fiscal year 2019. The deficit comes despite the fact that the state recorded record taxpayer contributions.

The state will need to either boost revenue or find ways to cut costs. Given Illinois’ financial history, look for more of the former instead of the latter.

A new state report shows that the uptick came in part from weaker state contributions and lackluster investment returns. However, watchdogs note that the state saw record contributions of more than $10 billion for the first time in its history.

For the five state retirement systems, the ration for funding sits at 40.3%. While that figure is a tenth-of-a-percentage point higher than the 2018 fiscal year, things remain urgent. The report indicates that a new pension benefit buyout program of $405 million offset actuarial losses.

Illinois Pension Crisis Gets Ugly

New actuarial reports indicate that taxpayers will pour another $11 billion into pensions in the fiscal year 2020. The report states that the state pensions will account for 27% of the state budget. That figure is up 25% from fiscal 2019. Illinois maintains the lowest credit rating of any state – just above junk status. Earlier this year, Governor J.B. Pritzker established new task forces to address pensions. One explored asset sales to increase pension figures.

The challenge for pension funds comes at a time that they are forced to take more aggressive steps to ensure returns. CREATE Research notes that pension funds have new concerns over low-interest rates and “modern monetary theory.”

Related: Sovereign Funds Allocate 21% to Alternative Investments – the Highest in Five Years