CHICAGO – A new Pew Veritable Trust brief shows just how bad the situation is concerning Illinois' pension funds. The overall assessment is that while nationwide pension debt has decreased, disparity continues to grow between well-funded and fiscally challenged public worker retirement plans.
Illinois – now down to an average of 51 percent funded – is one of the three most financially stressed pension funds in the nation, the study says:
The past decade has seen a continuing drift between the best- and worst-funded state pension plans. For example, South Dakota, Tennessee, and Wisconsin—the three states with the highest funded ratio, or the percent of the assets they need to fully fund their pension liabilities—were, on average, 97 percent funded in 2007. By 2012, at the low point of the business cycle triggered by the recession, their collective funded ratio had dropped by only 2 percentage points, to 95 percent.
Conversely, the three states with the lowest funded ratios in 2017—Illinois, Kentucky, and New Jersey—saw a drop from 69 percent funded, on average, in 2007, to 51 percent funded in 2012. More concerning is that even with strong investment returns over the five years ending in fiscal year 2017, the states with the worst-funded plans continued to report declining financial positions. Between 2012 and 2017, Illinois, Kentucky, and New Jersey reported an average 15 percent decrease in state funded ratios.
And despite the economic prosperity going on, little has changed, and another downturn could be devastating, Pew says:
Even after nine years of economic recovery, most state pension plans are not equipped to face the next downturn. Policymakers have not taken advantage of strong investment markets to make progress on closing the pension funding gap, which remains at historically high levels as a share of GDP.
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