Courtesy of Mish.
Illinois Pension Problems Mount
Illinois’ unfunded liabilities have risen ten out of the last eleven years. The only exception was 2011. This was despite massive rallies in financial markets every year since 2009.
One out of every five tax dollars goes to pensions, but that’s nowhere close to enough to stem the tide.
Illinois has the worst funded pension plans in the nation. Those plans are a mere 42% funded in aggregate.
That bleak estimate understates the problem because it assumes 8% annualized returns going forward. Those returns are not going to happen.
I expect 0-2% returns at best, and most likely negative real returns for seven to ten years.
Still No Budget
In October, Moody’s cut Illinois debt to one step above junk, specifically citing pensions as the “greatest challenge”. Lower ratings have driven up borrowing costs. In turn, rising borrowing costs mean less money to spend elsewhere.
The new year is less than a week away, but Illinois still does not have a budget.
Bloomberg reports Illinois Record Budget Impasse Makes It Worse for the State’s Pension Disaster.
As 2015 draws to a close, Illinois marks half a year without a budget. No spending plan has driven up borrowing costs, sunk its credit rating, and perhaps worst of all, exacerbated the state’s biggest problem: its underfunded pensions….
