Illinois Pension Debt Dips Slightly But Calls for Reform Intensify

Illinois' state pension debt stood at $143.5 billion at the end of fiscal year 2025, showing a slight decrease from the previous year. Despite this minor improvement, the state continues to hold the only unfunded pension liabilities above $100 billion nationwide, underscoring persistent fiscal challenges. The state had utilized federal pandemic relief funds in 2021 to address record-high liabilities, but debt levels have risen again, highlighting ongoing underfunding issues. Current annual pension contributions fall about $5 billion short of actuaries' recommendations, consuming nearly 20% of the state's budget and contributing to Illinois having the nation's highest property taxes. Experts flag pensions funded below 60% as precarious, and Illinois' funding level of 47.8% risks long-term stability for retirees. The report emphasizes safeguarding cost-saving pension reforms, particularly the Tier 2 plan for employees hired since 2010, which projected savings of $71.1 billion through 2045. Policy recommendations include preserving Tier 2 benefits, extending flexible retirement savings options similar to those in the State Universities Retirement System to all state employees, and pursuing constitutional amendments to enable further pension reforms. Without these structural measures, fluctuating investment returns could jeopardize pension system viability and increase taxpayer burdens. Lawmakers are urged to prioritize comprehensive pension reform to stabilize the state's finances and secure retiree benefits, ensuring government pension systems remain sustainable.