Surprise: Illinois vastly underestimated pension funding shortfall
posted at 3:11 pm on June 28, 2013 by Guy Benson
Congratulations, Illinois taxpayers:
Moody’s Investors Service reported that Illinois’ true unfunded pension liability in fiscal year 2011 was nearly 65% higher than the state’s official estimate. In its report titled “Adjusted Pension Liability Medians for U.S. States,” Moody’s calculated the unfunded liabilities for Illinois’ three largest state-run pension plans at $133 billion, compared to the state’s official calculation of $81.3 billion. Illinois’ pension funds use overly optimistic assumptions in calculating their unfunded liability, including an expected 8% yearly average investment return. The new Moody’s methodology uses more realistic market rates based on high-quality corporate bonds. The rate Moody’s used for fiscal year 2011 was 5.67%, resulting in a $52 billion increase in the state’s unfunded liability. Moody’s has yet to publish their report on fiscal year 2012 liabilities. However, the market rates they’ll use to calculate the unfunded liability have already been determined. As of June 30, 2012, that rate was equal to 4.13%. That means Illinois’ official $97 billion underfunding is set to approach $200 billion under the new Moody’s methodology.
Friendly reminder: Illinois voters sent veto-proof Democratic majorities to both houses of the legislature last fall — not that vetoes are much of a concern in Springfield these days. Illinoisans elected a Democratic governor in 2010, well after the state’s fiscal crisis was readily apparent, and in the immediate wake of the Blagojevich spectacle. But hey, at least they kept that dog-hating Republican meanie from winning. Phew. Before Gov. Quinn narrowly won his race, the state’s public sector unions were busy publishing propaganda “debunking” public pension “myths.” A few months later, they were picketing outside the state capitol in favor of raising taxes. Illinois has the worst credit score of any state in the union, having earned rating downgrades from two separate agencies in recent months. Second on that list is California — which, coincidentally, also boasts Democratic supermajorities and a Democrat governor. Weird!