The pension shortfall in Illinois surpasses $500 Billion, and the average debt burden is now $110,000 per household. Moody’s estimate of Illinois’ retirement debts, made up of pension and retiree health shortfalls at the state and local level, hits $530 billion in 2020. In 2019, the burden was $90,000 per household. But first, here is a breakdown of the Illinois unfunded liabilities.
- Illinois’ five state-run pension funds – $313 billion
- State retiree health insurance – $55 billion
- State pension obligation bonds – $9 billion
- Chicago and Cook County pensions and retiree health – $122 billion
- Other local government pensions and retiree health – $32 billion
The $110,000 per household is an average across the entire state, but the precise burden for Illinoisans differs depending on where they live. The debt burden on Chicago’s one million households is larger because of the city’s deeper debt crisis. There, each household is on the hook for $180,000 for their share of state and local retirement debts. Learn more here and see a summary chart below.
What Are Unfunded Liabilities? Unfunded liabilities are debt obligations that do not have enough funds set aside to pay them. A liability is a legal duty of a person, organization, or government entity to pay a debt that comes from a past or current contract or action. In brief, a liability is a claim on the debtor’s current or future assets. Most of the time, they refer to the US government’s debts or pension plans and their impact on savings and investment securities. Unfunded liabilities can have a major adverse effect on the total economic health of a nation or corporation. Learn more here.
What are these unfunded liabilities in Illinois vs. the other states? When looking at pension shortfalls vs. revenue across the states, a few stand out.
- With more than triple the population of Illinois, California has a state-level shortfall of $240 billion – $70 billion less than Illinois.
- With more than double the population of Illinois, Texas has a shortfall of $173 billion – $140 billion less than Illinois.
- Suffering a pension crisis of its own, Kentucky has a $56 billion state-level shortfall – just a fifth the size of Illinois’.
- When measured on a per household basis, Illinois’ state-level pension debt totals more than $64,200. That’s the nation’s 2nd-largest burden, behind only Connecticut’s $65,400 per household.
- Illinoisans’ state-level household burden is four times larger than the national average of $15,600
- Compared to residents in neighboring Iowa and Wisconsin, Illinoisans’ burdens are 18 to 20 times larger. Iowa and Wisconsin’s per household burdens are $3,500 and $3,200, respectively.
See a summary chart the shows Illinois vs. the other states. Illinois is the most in trouble state.
But these numbers are merely the state’s unfunded liabilities. What about federal unfunded liabilities?
When you include the unfunded national liabilities such as Social Security and Medicare, that actual US federal debt stands at $123.11 trillion, according to the Financial State of the Union 2021 published by Truth in Accounting. To pay off all of Uncle Sam’s liabilities, every taxpayer in the US would have to write a check for $796,000.
Other estimates claim that the actual unfunded liabilities are closer to $163 trillion, more than five times the national debt – see here. Still, other estimates put this number at $210 trillion – and this estimate came from 17 Nobel Laureates and 1200 economists who say they agreed a few years back – so it could be more today. See more here. With this estimate, one would need to potentially double the previous estimate, which would mean that every taxpayer must pay about $1.8 million.
Suddenly, the Illinois unfunded liabilities don’t seem so bad at $110,000 per family.
We have obviously entered the “silly zone.” For the fourth quarter of 2019, total wealth in the US was $111.04 trillion – see here. Much of that is at the 1%er’s social-economic level. So we could tax all wealth in America at 100% and still only pay half of the unfunded liabilities. Take a guess who will obviously be short-changed?
The bottom line is – politicians have way over-promised the electorate to buy their votes, only to set up the nation for a very sad future. Unfortunately, many of our politicians today are not addressing the problem, rather accelerating the problem. It is not a matter of “if,” but “when” the ticking time bomb explodes.
What could go wrong?
See more #chartoftheday posts.