\n\t\t\t\tIllinois state pensions have less money to pay retirees than any state according to Equable Institute. It\u2019s the third year in a row for Illinois coming in last.
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For the third year in a row, Illinois\u2019 government pensions have the lowest funded ratios in the nation according to Equable Institute<\/a>.<\/p>\n The funded ratio<\/a> is how much money the pension funds have on hand compared to how much they owe pensioners. Illinois ranks dead last among all other states for the third year in a row.<\/p>\n<\/p>\n It\u2019s also one of only three states remaining below 60% funding, last year there were only four<\/a>. For comparison, 16 states have a funding ratio of over 90%.<\/p>\n Low funding ratios mean less certainty because it means the state does not have the money to pay out what it promised. If liabilities continue to grow faster than assets, this funding ratio shrinks.<\/p>\n Eventually, the state doesn\u2019t have enough money to pay out what\u2019s owed at a given time, known as insolvency. Without money on hand to pay obligations, retiree benefits may be cut with payouts amounting to pennies on the dollar.<\/p>\n But even before insolvency hits, low funding ratios still hurt the state. Just like failing to pay off credit card debt, \u201cputting off\u201d until later is the biggest reason behind Illinois\u2019 bottom-of-the-nation<\/a> credit rating, according to Moody\u2019s.<\/p>\n This low credit rating leads to higher borrowing costs and less appeal for people to stay here, let alone to make Illinois their home when compared to nearby states. The amount needed to go to this debt is also why Illinoisans pay so much more in taxes but get less<\/a> in services to make them feel<\/a> like they\u2019re getting their money\u2019s worth.<\/p>\n The four state-managed pension plans saw virtually no change in their debt in fiscal year 2025, moving from $143.7 billion in debt to $143.5 billion, despite authorizing over $11.2 billion<\/a> to fund these systems. While the Governor\u2019s office called this evidence of \u201csteady progress,\u201d<\/a> Illinois\u2019 continued place at the bottom of national rankings is no cause for celebration.<\/p>\n The improvement in the state\u2019s pension debt can be attributed to better-than-expected market returns. Just as the market can cause improvement in one year, those gains can vanish the next year.<\/p>\n State legislators are still considering<\/a> reforms that would spike benefits and drive Illinois\u2019 pension debt up even further. To combat its rapidly growing pension obligation, in 2010, Illinois implemented an alternative plan for new employees, dubbed \u201cTier 2.\u201d<\/p>\n This plan\u2019s changes to the initial \u201cTier 1\u201d benefits prevented<\/a> costs from escalating. Critics of Tier 2 have concerns about benefit adequacy and compliance with federal rules for retirement benefits, but the state\u2019s creation of the \u201cSSWB Reserve Fund\u201d offers a safety net<\/a> solution if that is ever found to be the case. In the meantime, any Tier 2 boosts only threaten the little remaining stability of Illinois pensions.<\/p>\n