Lawmakers promised more and more benefits to retired teachers, police officers, firefighters, and other government workers over the past decade; meanwhile, the pool of money to pay these pledges was neglected. The estimated shortfall of nearly $100 billion between now and 2045 is, believe it or not, a rosy scenario, given that a) it assumes robust investment returns and b) doesn’t include local pension disasters, like the estimated $20 billion hole in the City of Chicago system.
Quinn and Chicago Mayor Rahm Emanuel both urged the legislature to tackle the crisis during last year’s session. “The day of reckoning has arrived,” Emanuel warned. All sorts of repairs were floated: raising the retirement age for public employees, increasing employee contributions, freezing cost-of-living increases, shifting younger workers into 401-(k) style savings. Quinn even proposed that responsibility for teacher retirement plans should be shifted to local school boards. You can guess what the locals thought about that......
....The Pew Center on the States, which tracks the pension funding problem nationwide, says Illinois now faces the worst mess in the country, with less than half of its pension obligations currently covered. But other states are suffering from symptoms of the same disease. According to Pew, 34 states were short in 2010 of the recommended 80-percent funding level considered safe for pension systems. (That is the most recent year for which data is available; defenders of public pensions argue that 2010 figures exaggerate the problem because they collected near the bottom of the bad economy.) In all, Pew estimates the total shortfall in state pensions to be $1.38 trillion."............
Jan 2013: Why Illinois is Going Bankrupt