Illinois’ $143.5 billion state pension debt saw a tiny dip, but meaningful reform is needed to stop threats to taxpayers and protect state retirees.
Illinois’ state pension debt was $143.5 billion at the end of fiscal year 2025, down slightly from the prior year, according to a new report from the state legislature’s Commission on Government Forecasting and Accountability.
Across the nation, Illinois remains the only state with over $100 billion in unfunded state pension liabilities.
In 2021, state leaders put federal pandemic relief funds into the system to counteract the record unfunded liability of $144.4 billion. But since then the debt has continued to slowly climb back to the all-time high.
The state is still not making the yearly pension contributions actuaries say are needed to keep the debt from growing, even though the five statewide systems eat about 20% of the state’s budget. The payments are about $5 billion short.
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. But 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.
Experts say pensions funded below 60% are in danger, and below 40% are nearing the point of no return. At 47.8% funded, Illinois state pensions aren’t providing the stability needed for retirees to feel confident their benefits will be there when they need them.
Lawmakers need to stop adding to the burden, spread reforms which have saved the state money and change the Illinois Constitution to allow control of future liabilities. They must do so to relieve the mounting pressure on taxpayers and provide more security for retirees.
First, they need to 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. When Tier 2 was implemented, the Commission on Government Forecasting and Accountability projected it would reduce state contributions by $71.1 billion through 2045. These savings have helped prevent Illinois’ pension debt from spiraling farther out of control.
Undermining Tier 2 by implementing benefits that are closer to Tier 1 would undercut those savings. It would raise costs for taxpayers and worsen instability for retirees.
Second, they should expand retirement choice by extending to all state employees the same retirement savings plan option members of the State Universities Retirement System enjoy. This is not just better for employees who want a solid retirement benefit without working for 20 years, it also prevents unfunded liabilities from growing out of control.
Finally, policymakers should pursue a constitutional amendment to allow for pension reform. This would let Illinois enact commonsense reforms other states have passed, improving the state’s financial position and protecting benefits for pensioners.
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.
