Illinois state lawmakers on Jan. 30 heard a proposal to borrow
more than $107 billion to fund pensions. If implemented, it would be the biggest
debt sale in municipal bond market history.
Lawmakers discussed the proposal in the House Personnel & Pensions Committee.
The State Universities Annuitants Association, or SUAA, claims the plan will
save the state $103 billion in the next 25 years. But baked into that estimate
are assumptions regarding borrowing and investment returns that are by no means
Illinois’ pension debt is as high as $250 billion, according to Moody’s
Investment Service. The SUAA plan is supposed to bring Illinois’ five public
pension systems from 38 percent funded to 90 percent funded in a single surge of
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But Illinois’ credit rating is already just one
notch above junk – the worst in the nation. Taking on a record
amount of debt will do that credit rating no favors.
Not only that, but the association’s proposal
ignores the root of the issue: the exploding cost of Illinois
The first step Illinois must take toward real pension reform is
simple – new employees should be moved into a defined-contribution
plan that they can control, and existing employees should be given
the option to opt in. The plan should be modeled after the
self-managed plan that’s been offered to state university employees
for nearly 20 years.
What Illinois does not need is a new scheme to ruin its credit
rating while perpetuating the failures of the current pension
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