Illinois families spend 3rd-highest in nation on government pensions

The typical career state pensioner earns more in retirement than Illinoisans do working. Households now pay over three times more than they did nearly two decades ago to cover the costs.

Each Illinois household spent $2,769 funding government pensions in 2021, paying the third most for government workers’ retirements in the U.S. despite leading the nation in pension debt.

State and local pensions cost Illinois homeowners $808 a year in 2002. Since then, household pension payments have grown by 13% each year, when adjusted for inflation, as lawmakers disregarded calls for constitutional pension reform.

The price tag for neglecting the pension problem for nearly two decades: $26,533 per household. That’s $10,785 more than the average American household paid for pensions during the past 19 years.

Dr. Al Froehling is an orthopedic surgeon from Mount Vernon, Illinois, who is retiring after 39 years in medicine. He said Illinois’ rising taxes and inflation have him nervous he could outlive his retirement savings.

“I’m coming up on my 70th birthday and surgery is physical work. It requires dexterity and mental acuity. There comes a time where you just have to stop before you get too old,” Froehling said.

“When I started my practice in 1984, I thought that it was important to provide retirement plans for all my employees,” Froehling said. “I’ve managed to build up a retirement fund for myself and my staff, but we can’t count on annual COLA increases. Private plans can never be as generous as these public plans. And taxes keep going up.”

Illinois households spent $1,305 more than the average American household on pensions in 2021 – more than households in Indiana, Iowa, Minnesota and Wisconsin combined.

Retirements for state and local government workers in Illinois are the third-most generous nationwide.

The contributions are especially generous for Illinois’ career state employees. State workers who spent at least 30 years in the public sector receive a median retirement income higher than most Illinoisans earn working.

The typical career state pensioner, which excludes employees also qualifying for Social Security, collected $82,478 in benefits in 2021 while the median working Illinois resident earned just $46,634 a year.

Over a lifetime, the typical state pensioner receives a median $2.42 million in retirement income. Their pension contributions while working are only $113,362, which includes money out of their pockets plus money from their state employer.

“I wonder when I look at my property taxes how we’re able to pay more for people’s retirement benefits than we are the people actively working today,” Froehling said. “It’s just not sustainable.”

Illinoisans spend the third-most in the U.S. per household funding public employees’ retirements today thanks to decades of state politicians promising increasingly generous benefits to government unions.

This politically expedient relationship is responsible for more than tripling Illinoisans’ household pension payments since 2002, adjusted for inflation, as the state pension debt grew to the largest in the nation.

While numerous reports have pointed to Illinois’ pension crisis as crowding out core government services and driving the state’s nation-leading tax burden, the majority of lawmakers ignored calls for constitutional pension reform. Those same state pensions ate more than 27 cents of every dollar spent by the state in 2022.

Government employees aren’t to blame for seeking a secure retirement and taking advantage of a lucrative system. These retired public servants should collect the pension benefits they’ve been promised and rely on.

Politicians promising generous pension benefits that neither the state nor Illinoisans can afford are the true threat to the long-term solvency of Illinois public retirement systems. Using tactics such as the Edgar ramp, scoop-and-toss borrowing and the 90% funding requirement, these lawmakers have placed pension costs on future taxpayers rather than sought reform.

But adding a referendum on the ballot to vote on constitutional pension reform would put that choice back in the hands of Illinoisans today.

A previous “hold harmless” pension reform developed by the Illinois Policy Institute would tie all pension cost-of-living adjustments to inflation rather than a fixed rate of annual growth, saving more than $50 billion by 2045. It would also increase required government contributions to fund 100% of promised pensions rather than the current 90% target.

“We’re seeing more people in Illinois delay having children. We’re also seeing more of our spending problems being left to our children and our grandchildren to solve,” Froehling said. “It’s not fair to keep asking people to spend more when they are really getting less.”

Polls show a supermajority of Democrats and Republicans in Illinois want constitutional pension reform. It is time Illinoisans were allowed to vote on this potential tax savings rather than yet another constitutional change that guarantees pension costs will continue to grow.