The Land of Lincoln has earned a dubious distinction, according to a new report by Moody’s: It is without peer in how its state pension liability compares to its revenue. Moody’s says that Illinois’ pension debt amounts to a whopping 318% of its revenue in 2012. Its three-year average for the period 2010-12 was almost as bad, at 258%.
And that trend has continued. Moody’s said that Illinois had an adjusted net pension liability of $187 billion in 2012; the U.S. Census Bureau said that for fiscal year 2013, the state’s pension obligations amounted to $10 billion more than that.
However, at least one ratings source sees a ray of hope. Standard & Poors late last year upgraded its rating for Illinois from “negative” to “developing” five days after Gov. Pat Quinn (D) on Dec. 5 signed into law a pension reform measure, saying in a press release that it believes the law “could contribute to a sustainable path to fiscal stability.”
The measure does not cut current retirees’ pensions, but it does reduce the annual cost-of-living adjustment for most state employees. It adopts a funding schedule that requires level payments and achieves 100% funding by fiscal year 2044. Lawsuits have been filed against the measure, arguing in part that it violates a provision in the Illinois constitution that says that pension benefits cannot be diminished or impaired.
Illinois is also one of the states with the largest gap between revenue and pension obligations — nearly $100 billion.
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