SPRINGFIELD - The state's five pension systems are collectively under funded by more than $62 billion, according to a new financial report released Tuesday by state auditors.
That liability was $8 billion more than the previous year, an increase of 14.7 percent.
But it could be worse. A recent state law seeks to "smooth" sudden investment gains or losses by spreading them over five years rather than making the pension systems adjust for them annually.
Had that law not been in place, auditors pegged the fair market downturn of the pension systems at $23.5 billion, an increase of 43.2 percent.
The report released Tuesday by Illinois Auditor General William Holland covers June 30, 2008 through June 30, 2009. The pension system administrators provided the numbers for the funds covering retired teachers and administrators, state university employees, state employees, judges and Illinois lawmakers.
The state is 15 years into a 50-year plan to restore financial health to the pension systems. The plan, which spells out the required state contributions to the systems, is intended to have the systems 90 percent funded in 2045.
The $62.4 billion unfunded liability reflects the money the state needs, but doesn't have currently, to cover all the earned pension credits if they were cashed in all at once. While that's an unrealistic situation, it is a financial measure used to gauge the health of pension systems. It's akin to having enough money in your savings account to cover your mortgage if the bank called the entire loan at once.
The mere existence of government pensions has become a heated political topic amid a soured economy that has left many taxpayers without such financial security. Gov. Pat Quinn last year proposed reducing pension benefits, requiring those covered to pay more and work longer in order to retire with a pension. However, it failed to advance at the Capitol, though is likely to be revisited when Quinn gives his budget speech next month.
Even if approved, such plans cannot reduce the benefits of existing pensioners or even those already within the system. Those benefits are constitutionally protected. Rather, Quinn's plan would create a new system for all new hires. It's estimated such a change would save billions of dollars over the coming decades, though little initially.
Political observers and pension experts agree the main reason for this massive liability is because the state for decades failed to contribute the required amount to the pension systems. School districts, teachers and state workers have all been required to make their contributions, but the state routinely spent its contribution elsewhere. Each time it did, it added to the debt that also gets compounded with interest.
Last year, unable to come up with the required payment, the state instead borrowed billions of dollars to stay on track with the 50-year funding plan.
Things aren't going to ease up anytime soon. The auditor's report pegs the required state payment at just over $5 billion for the next budget year, an amount that includes nearly $542 million in loan payments.