Report ranks Illinois' finances 48th in the country with an 'F' grade

[October 26, 2022]  By Kevin Bessler | The Center Square

(The Center Square) – Illinois ranks near the bottom of a new analysis of state finances across the U.S.

Truth in Accounting’s 13th annual Financial State of the States ranked Illinois 48th in the country, the same rank as last year. Only two other states, New Jersey and Connecticut, graded worse than Illinois for fiscal health. The review is of the states' fiscal year that ended June 30, 2021.

The report notes that Illinois had about $39 billion available to pay nearly $250 billion worth of bills, a shortfall that breaks down to a burden of $49,500 per taxpayer. As a result, the state receives an “F” grade for its state finances.

Truth in Accounting noted that Illinois was extremely tardy when releasing its annual financial report. Illinois released its report more than 356 days after the end of the fiscal year, when the standard for timeliness is 180 days.

The report says Illinois’ financial problems stem mostly from unfunded public employee retirement obligations. Christine Kuglin, director of the Truth in Accounting Project at The University of Denver, said 2021 was beneficial for pension returns, but things have taken a turn for the worse.

“Those are subject to the same types of market fluctuations that we who have our own private pension funds, the governments are the exact same,” Kuglin said.

Although pension liabilities decreased by $12.1 billion in 2021 due to the increase in investment value, the report said much of the value increase is only on paper. Until the pension investments are sold, these liability decreases are not real.

The report notes that Illinois had only set aside 45 cents for every dollar of promised pension benefits and one cent for every dollar of promised retiree health care benefits. If benefits and funding are not changed, future taxpayers will be burdened with paying the under-funded retirement promises.

Most governments have very little money to pay promised pension benefits because they follow a pay-as-you-go approach, the report said, paying an amount each year equal to the benefits distributed or claimed in that year. The pay-as-you-go approach pushes current compensation costs and liabilities onto future taxpayers.

 

The Illinois Teachers' Retirement System this week said the fund's long-term funded ratio has improved, racing nearly 44% at the end of fiscal year 2022, despite shaky investment markets and uncertainty in the global economy. The TRS Board of Trustees gave preliminary approval to a $6.04 billion state government contribution for the System in fiscal year 2024. That's a 2.5% increase from the $5.89 billion for the fiscal year that ends June 30, 2023.

Kevin Bessler reports on statewide issues in Illinois for the Center Square. He has over 30 years of experience in radio news reporting throughout the Midwest.