In just ten years, the Illinois General Assembly pushed the burden of billions in governmentspending onto Illinois’ future generations. Of-cial estimates put Illinois’ unfunded pension li-ability at $85.6 billion. But that amount does nottake into account the $25.8 billion in pension ob-ligation bond (POB) payments still outstanding, which have a net present value of approximately $17.2 billion
(see Graphic 1).
Adding the pres-ent value of the POB debt to the unfunded pension liability puts the total pension bur-den at $102.8 billion.
The legislature accomplished this sleight of hand by avoiding tough spending decisionsand borrowing heavily to pay the state’s statu-tory pension contributions. The state borrowed$10 billion in scal year 2003 under Gov. RodBlagojevich, but the bad habits didn’t begin andend with his governorship. Under his successor,Gov. Pat Quinn, Illinois borrowed an additional$3.5 billion and $3.7 billion in scal years 2010and 2011, respectively. The xed nature of the pension obligationbonds limits the state’s exibility to manage fu-ture costs. Whereas the cost of the future pen-sion liabilities can be reduced through reform,the same is not true for the bond obligations. The past decisions of legislators to kick the candown the road will impose signicant costs onIllinois budgets for years to come.Graphic 2 shows how the pension bond re-payments are allocated between the differentsystems based on their relative size. The larg-est system, the Teachers’ Retirement System(TRS), represents approximately 59 percent of the state’s total pension obligation. The two next
is a Senior Budget and Tax Policy Analyst with the Illinois Policy Institute.
Illinois’ Pension Bonds
The other $26 billion obligation you shouldn’t ignore
T a x & B u d g e t
B r i e f
O c t o b e r 2 0 , 2 0 1 1
Graphic 1. Pension ObligationBond Repayment Schedule2012-2033
Fiscal YearAnnual BondRepayment
Source: Commission on Government Forecasting and Accountability