In his Feb. 21 presentation, Pritzker said under the current plan, the state's total funded liabilities would total an estimated $33.6 billion by fiscal year 2045. Annual required contributions to the state's pension funds are estimated to reach $18 billion by that year and afterwards "drop off drastically."
In fiscal year 2025, the state's total required contribution to its five pension funds (and the $11.9 billion Chicago Public School Teachers' Pension & Retirement Fund) is $11.5 billion, according to a report published in December on the website of state auditor Frank Mautino. The report states the Illinois Pension Code's method of establishing required contributions "does not adequately fund the systems."
According to the report, the funding ratios for the five state retirement systems ranged from 23.5% to 47.2% as of June 30. That is an improvement over the funding ratio range of 22% to 45.2% a year earlier.
Those systems are the $68.6 billion Illinois Teachers' Retirement System, Springfield; $23.4 billion Illinois State Universities Retirement System, Champaign; and three pension funds whose investments are overseen by the $23.7 billion Illinois State Board of Investment, Chicago. Those are the State Employees' Retirement System, Judges' Retirement System and General Assembly Retirement System.
Under the new proposal, Pritzker calls for an increase in the state's annual pension contributions when legacy debts are paid off. Specifically, he references the retirements in the 2017 $6 billion Backlog Borrowing General Obligation Bonds in fiscal year 2030, and the 2003 $10 billion pension funding General Obligation Bonds in fiscal year 2033. He proposes dedicating half the revenue being used to pay off those bonds to make additional pension contributions when those debts are paid.
Pritzker said in the presentation that making the decision this year "to dedicate these future savings to increase the pension contributions in FY30 through FY40 above what is currently required will save taxpayers an estimated $5.1 billion by FY45."
Also in the presentation, Pritzker proposed creating fixed-length amortization strips beginning in 2035 to "soften the potential shock to the state budget from short-term negative returns" as the pension funds approach a full funding.
The additional payments, along with extending the funding goal to fiscal year 2048, should bring the pension funds to a fully funded state, Pritzker said in the presentation.
The proposal comes as Illinois' state budget has tightened after four years of balanced budgets, increased revenues and the payment of short-term liabilities and some long-term state liabilities that enabled the state to make $700 million in additional contributions to the pension fund during the last two fiscal years.
In his Feb. 21 FY25 budget address to the Illinois General Assembly, however, Pritzker said "Our FY25 budget proposal makes some hard choices. I wish we had big surpluses to work with this year to take on every one of the very real challenges we face. It's important to note, that while this budget is tight this year, our fiscal house is in order, and we are able to keep our commitments to the people of Illinois."
The Pension Stabilization Fund was created in 2006 to make additional contributions to the five state retirement systems when state general fund revenues exceed certain thresholds each year. The state was able to contribute $300 million to the stabilization fund in the fiscal year ended June 30, 2022, and another $400 million in the fiscal year ended June 30.
