Illinois has the nation’s worst public pension crisis. Nationwide analysis from the Equable Institute shows Illinois state pensions remain fiscally unstable and threaten retirees and taxpayers, underscoring the need for reform.
The Equable Institute’s annual report on the state of public pensions nationwide reaffirms that Illinois pensions continue to lag the nation in funding and are in desperate need of reform.
If the state fails to fix its pension issues, the budget will continue to be strained, people will continue leaving the state over high taxes and future pension benefits could be at risk. Preserving the cost savings of Tier 2, offering retirement choice to state employees and constitutional pension reform should all be implemented if Illinois is to have any hope of gaining fiscal stability.
Comparing pension debt to the state’s gross domestic product helps measure the state’s ability to pay based on the local tax base. By that measure, Illinois ranks as the nation’s worst: unfunded obligations equal 19.02% of state GDP, up from 18.52% a year ago. In other words, roughly one-fifth of everything produced in the state would be required just to erase the shortfall.
That’s driving up the burden on taxpayers, whose contributions to state pension systems have grown nearly 20-fold, from $614 million in fiscal year 1996 to $11.2 billion in fiscal year 2025. The heavy pension bill explains why Illinoisans pay the highest effective property tax rate in the country.
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Chicago’s pension crisis is heading for a Detroit-style collapse