This hasn’t received much attention, but it’s big, important news that Illinois’ unfunded government pensions amount to at least $200 billion, instead of the $140 billion that’s usually cited.
I say “at least” because the $200 billion figure calculated by Moody’s Investors Service is for 2016, about two years old. What it amounts to now is anyone’s guess.
It means that fully funding Illinois’ five troubled government employee pension funds is much more out of reach than generally supposed–as if fully funding the $140 billion wasn’t a pipe dream in the first place.Illinois is in the clutches of the public employee unions and a state constitution that makes it nearly impossible.
I’ve always assumed that the $140 billion figure was suspect because retired government workers are living longer, thus increasing the funds’ expected payout. (For those who are wondering how Moody’s calculated the $200 billion, see the explanation at * below.) Also, it always is guesswork about future returns on the funds’ investments. Frankly, there are too many ways to fudge the numbers, oh, not that anyone would do that to make the financial wreck that is Illinois look not so bad.
How bad is it? According to Moody’s, Illinois’ near-junk bond credit rating of Baa3 is the worst among the states. Illinois’ net pension liability is 486.6 percent greater than available revenues. And its fiscal year 2015 (latest available) contributions to the funds fell 6.7 percent short of what’s needed for the funds just to “tread water.”
In other words, while Moody’s most recent outlook on Illinois finances was “upgraded” to “stable” from “negative,” its credit rating remains by far the worst among the states. And that reassessment is partially based on an Illinois budget –the first in two years–that is based on faulty assumptions and vague promises.
So, keep your eyes and ears open for when Illinois implodes into its own massive black hole of debt.
- Federal deficit may have doubled.
- New commission to consider transfer of state assets to pension funds.
*This cross–sector rating methodology replaces the Adjustments to US State and Local Government Reported Pension Data methodology published in April 2013. We have updated the description of our standard balance sheet adjustment and included a description of our standard income statement adjustment. Both of these reflect the implementation of Governmental Accounting Standards Board Statement 68 accounting standards, which requires adjustments that were not previously necessary. We have retired the concept of amortizing adjusted net pension liabilities on a level dollar basis over 20 years, a cost metric not included in any scorecards of primary rating methodologies. We have also added a description of how we calculate the “tread water” indicator.
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