Illinois Alone Has State Pension Debt Over $100 Billion, Experts Warn of Pension System Collapse
Illinois is the only state with over $100 billion in unfunded state pension liabilities, according to a new report from the state legislature's Commission on Government Forecasting and Accountability. The state's pension debt reached $143.5 billion at the end of fiscal year 2025, raising concerns about long-term pension system stability and taxpayer burden.
The State Runs Out of Money for Pensions
Illinois is the only state in the nation with over $100 billion in unfunded state pension liabilities, according to a new report from the state legislature's Commission on Government Forecasting and Accountability.
The state's pension debt reached $143.5 billion at the end of fiscal year 2025, down slightly from the prior year but still representing a dangerous financial burden on Illinois taxpayers.
"Illinois remains the only state with over $100 billion in unfunded state pension liabilities," the report stated.
How the Crisis Developed
In 2021, state leaders temporarily placed federal pandemic relief funds into the pension system to counteract the record unfunded liability of $144.4 billion. Despite this temporary infusion, the debt has continued to slowly climb back to its all-time high.
The state continues to fall short of the yearly pension contributions that actuaries say are needed to keep the debt from growing. Even though the five statewide pension systems consume about 20 percent of the state's budget, the payments remain approximately $5 billion short of what they should be.
The $200 million improvement seen this year after three years of growth should not be taken as a sign state public pensions are on the right track. Minor fluctuations can be expected from investment returns. Just as the market can fluctuate up, it can also fluctuate down, which without structural reforms could endanger pensions in the future.
"When the state continues to promise benefits that are beyond what they can afford, it puts an enormous burden on taxpayers. That's a large part of why Illinoisans pay the highest property taxes in the nation," the report noted.
The Funding Problem
Experts warn that pension systems funded below 60 percent are in danger, and systems funded below 40 percent are nearing the point of no return. At 47.8 percent funded, Illinois state pensions are not providing the stability needed for retirees to feel confident their benefits will be there when they need them.
What Needs to Change
Lawmakers need to take several actions to address the pension crisis:
-
Preserve the cost-saving elements of Tier 2, the plan for employees hired since 2010, by refusing to spike pension benefits through recent proposals such as a higher pensionable salary cap
-
Expand retirement choice by extending to all state employees the same retirement savings plan option members of the State Universities Retirement System enjoy
-
Pursue a constitutional amendment to allow for pension reform that would let Illinois enact commonsense reforms other states have passed
"A slight dip is not a signal for state leaders to ignore their responsibilities to taxpayers and state workers. Job No. 1 in Springfield is to make government pension systems whole," the report concluded.
The Human Cost
The Reason Foundation reports that across the country, only Illinois has more than $100 billion in state-managed pension debt, with California in second place at $90 billion in unfunded pension debt for its state-managed plans.
Illinois families pay the highest effective property taxes in the country, with most of those dollars being spent to keep up with overpromised pensions rather than to create better schools, safer streets or improved services.
The 1970 Illinois Constitution enshrined a pension protection clause that courts have interpreted to shield not only earned benefits, but also all future benefit accruals from any reduction. This constitutional provision has made meaningful reform nearly impossible without a constitutional amendment.
The Numbers Behind the Crisis
Illinois has 677 pension funds. Five of them are funded and run by the state government and make up two-thirds of the state's total pension debt. These state-run systems are:
- The General Assembly Retirement System
- State Employees' Retirement System
- State Universities Retirement System
- Teachers' Retirement System
- Judges' Retirement System
According to the updated report from the Center for Tax and Budget Accountability, Illinois state government faces a $142 billion aggregate unfunded liability owed to its pension systems as of the end of fiscal year 2023. This represents a 45 percent funded ratio, which is 35 percentage points below the standard set by the United States Government Accountability Office, which considers a public pension system financially healthy at 80 percent or higher.
"Illinois alone lets state pension debt top $100B," according to the headline from Illinoispolicy.org, which first reported on this story.