Illinois‘ overall fiscal picture is one of the worst in the nation. The state consistently scores among the worst on corruption ratings; significant income tax increases are constantly under consideration; and municipal bonds are poorly rated and require high yields to attract skeptical investors. Among all public pension funds, the Illinois Teachers‘ Retirement System is arguably the worst. The program is, for all practical purposes, a pay-as-you-go program. Attempts in the last ten years to improve funding ratios have done little to bolster the program (see Figure 3). In fact, the fiscal year 2012 budget authorizes $4.6 billion of borrowing from the state‘s general fund to support pension payments owed in fiscal years 2010 and 2011. When debt-service obligations are taken into account, Illinois needed to borrow $6.2 billion to shore up the Illinois Teachers‘ Retirement System.
In 2010, Illinois Governor Pat Quinn authorized changes to Illinois‘ pension program that raised the retirement age to 67 for new workers and capped the maximum pensionable salary at $106,800, but no major reforms were passed in the 2011 legislative session. Rather than reform their shaky pension system during the 2011 session, Illinois‘ legislators pushed the problem into the future and relied on more general-fund borrowing to delay dealing with the crisis. Worst of all, legislators kicked the strong dose of austerity necessary to improve Illinois‘ long-term fiscal health down the road. Illinois‘ reforms only affect new hires. The benefits of these reforms for Illinois‘ funding ratios in the present are trivial. They will not be fully realized—assuming no further political maneuvers undo them—for thirty years or more.