The Illinois General Assembly has approved a plan to pay about $4.5 billion into the state’s pension system next year, the Illinois Statehouse News reports.It will be the first time in two years that the state does not borrow to make its pension contributions. Illinois borrowed $3.7 billion this year to make its payment.
The state’s five public pension systems are underfunded by more than $190 billion, according to some estimates. The funds are now being investigated by the SEC.
The decision to make the payment this year breaks a history of pension neglect, as University of Illinois economics professor J. Fred Giertz explains:
“If you don’t have enough money, what do you do? Well if you don’t want to raise taxes, you don’t want to make cuts, you simply don’t put all the money into the pension system that’s need that particular year,” Giertz said. “And nothing bad happens right away, but you do that year after year after year and sort of the opposite of compound interest (happens).”
The problem has triggered pension reforms for new state employees, but some politicians say more changes are needed. Illinois Treasurer Dan Rutherford, a Republican, said Tuesday that the state should give current employees a choice between the existing plan and a new 401(k)-style plan.