New law borrows $1 billion to extend pension buyout option for Illinois state employeesMay 6, 2022
Gov. J.B. Pritzker signed into law Thursday a measure that borrows $1 billion to extend the existing pension buyout program for Illinois state employees for two more years.
It is the latest in an effort to reduce the worst-rated state’s massive unfunded liability for its retirement systems.
“The legislation I’ll sign today extends the window for state employees, university workers, and educators to take advantage of early access to their pension savings through fiscal year 2026,” Pritzker said during a news conference in Springfield Thursday.
The recently approved state budget authorized a $500 million payment to the state pension fund on top of the required annual contribution to reduce pension liabilities, but the unfunded obligation is still in the neighborhood of $140 billion.
“When this idea was formed by myself and Rep. Mark Batinick, we put aside our different ideas on partisan issues, and worked together to find a bipartisan solution for the state’s most persistent and crippling financial problem,” said Sen. Robert Martwick, D-Chicago. “When Democrats and Republicans work together on these core financial issues, every Illinoisan benefits.”
Batinick, R-Plainfield, was not present at the bill signing but released a statement.
“I am delighted to see this program extended after successful implementation that has saved the state over $1 billion on our unfunded pension liability,” said Batinick. “I look forward to seeing how much more we can save to finally overcome and move past our state’s longtime pension crisis.”
Illinois has paid more than $820 million under the program as of Jan. 1, according to the governor’s budget office. From the initial $1 billion bond authorization, the state sold $300 million in 2019, $350 million in 2020 and $235 last year.
Illinois’ unfunded pension liability, which grew in size for years largely due to insufficient state contributions, is a key drag on its credit ratings even after it received the first upgrades in two decades last year.
Citing “fundamental improvements in Illinois’ fiscal resilience,” Fitch Ratings issued two more credit upgrades for the state’s general obligation bonds and Build Illinois bonds. Illinois’ rating still remains among the worst rated states in the nation.
Laurence Msall, president of government watchdog Civic Federation, told Bloomberg the buyout program may not be as beneficial as broader structural reform.
“We have not seen any actuarial analysis for the cost of the borrowing compared to the savings and what’s necessary to achieve that,” said Msall.
The $1 billion in borrowing to pay for the extended buyout program will have to be paid back by taxpayers with interest.
This article was originally posted on New law borrows $1 billion to extend pension buyout option for Illinois state employees