–Capitol News Illinois

The state saw its unfunded pension liability decrease in fiscal year 2021, due in large part to investment returns exceeding 20 percent, according to a new report from the Commission on Government Forecasting and Accountability released Wednesday, Dec. 8.

Unfunded liabilities – or the amount of debt the state pension funds owe that they can’t afford to pay – dropped by nearly 10 percent, to $130 billion in FY 2021 from $144 billion in the previous fiscal year. That put the state’s five pension funds at 46.5 percent funded, up from 39 percent the previous year.

It’s the third decrease to unfunded liabilities in the last 15 years. Otherwise, unfunded liabilities have risen annually from $42.2 billion in 2007.

But the report also noted that not much has changed to alleviate the underlying financial pressures that have caused unfunded liabilities to triple since the financial crisis of 2007-2008.

The returns of 22.9-25.2 percent for FY 2021, which ended June 30, far exceeded the anticipated 6.5 percent to 7 percent returns.

The report was otherwise substantially similar to countless other pension reports in recent years, particularly because it once again called on the state to revamp the much-maligned 1994 “Edgar Ramp” 50-year plan to bring the state’s five pension funds to 90 percent funded by 2045.

The actual target should be a 100 percent within the next 25 years or preferably sooner, according to a letter attached to the COGFA report from its actuary, Segal Consulting. Only then would the state begin to see sustained reductions to its unfunded pension liabilities.

But increasing pension payments is easier said than done, Alexis Sturm, director of the Governor’s Office of Management and Budget, said in a letter accompanying the report.

Changes to the current 90 percent target must be reviewed “carefully within the context of the impact on the state’s budget,” she wrote.

The $8.6 billion pension payment in FY 2021 was 20 percent of the state’s $42.9 billion General Revenue Fund budget, and pensions are routinely the state’s largest GRF expense outside of K-12 education.

According to the report, if the state wants to contribute at a rate approved by actuaries, it will need to contribute nearly $14.9 billion in FY 2023, which begins July 1, or 38 percent higher than what is provided for via the Edgar Ramp.