 Moody’s Investors Service, one of the nation’s major credit-rating agencies,
conducted a study on each state’s pension liability as a percentage of state
revenue and found that Illinois has the highest in the country by a wide margin.
The Prairie State’s three-year average pension liability over revenue is 258
percent, 58 points higher than second place Connecticut at 200 percent.
While looking at the percentages for years 2010-2012, Moody’s found that the
state’s rate was 318 percent in 2012 alone.
Carol Portman is the president of the Taxpayers Federation of Illinois. She said
the pension shortfall is a real crisis, and one that isn’t going away.
“The problem is only growing and the distance between the amount of resources
being contributed and those being received is growing and that’s pretty
alarming,” Portman said. “The new legislation, if it’s approved by the courts,
will probably help some. But it won’t be enough to make up this kind of
difference.”
The five main state-employee pension accounts are underfunded by about $100
billion and legislation that would have public employees increase their
contributions and receive less in benefits is currently making its way through
the Illinois court system.
Jeffrey Brown is a professor of finance at the University of Illinois at
Urbana-Champaign, and says the current crisis is the realization of many years
of mismanaged retirement programs.
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“For decades, the state government has under-invested in the
future and allowed the pension programs to accrue debt without a
real way to make up the difference,” Brown said. “They’ve kicked the
can for quite some time and now they’re realizing that’s not a
sustainable way of handling things.”
According to Moody’s, the total net pension liability for the
state’s public retirement systems is just short of $200 billion.
The pension system is under-funded and over-paying, Brown added,
and something has to give.
Portman agreed and said the steps that really need to be taken will
be difficult, and won’t make anyone happy.
“It will require a major change in what people expect to receive
from the system, as well as what they put into it,” she said. “If
everyone hates it maybe it’s the right solution. A good compromise
is one nobody likes.”
The median percentage for all 50 states is 51 percent. Ohio,
Florida, New York, Iowa, Wisconsin and Nebraska are in the best
shape in terms of pension liability.
Only three states besides Illinois and Connecticut – New Jersey,
Hawaii and Louisiana – have rates higher than 120 percent.
[This
article courtesy of
Watchdog.]
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