Illinois Is Number One

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The Illinois Senate took up pension change. By some measures, Illinois is struggling with the most outsize pension burden.
The Illinois Senate took up pension change. By some measures, Illinois is struggling with the most outsize pension burden.

Recently Moody’s Investor’s Service released it’s own numbers on the shortfall between what the state promised vs what money they have to pay their retirees. The report covers fiscal 2011 and highlights the effects of Moody’s new discount rates and other adjustments to the states’ reported pension positions, and also shows the ratio of Moody’s adjusted net pension liabilities to each state’s revenues. The following is an excerpt of their press release.

“Pension liabilities are widely acknowledged to be understated,” said Moody’s Managing Director Timothy Blake, who teamed with Vice President and Senior Analyst Marcia Van Wagner on a report outlining the rating agency’s plans, “Adjustments to US State and Local Government Reported Pension Data.”

“Our proposed adjustments will improve the comparability and transparency of pension information across governments, enhancing our approach to rating state and local government debt,” said Blake. “These adjustments build on our current approach to rating state and local government debt that includes an analysis of pension obligations based on reported data and examination of key underlying assumptions.”

Growth of reported unfunded pension liabilities over the past decade and the associated budgetary burden of pension contributions have increased the importance of pensions to state and local government credit, according to Moody’s, which treats pension liabilities similar to debt in order to better analyze the long-term liabilities of government entities.

Moody’s-adjusted fiscal 2010 state and local unfunded pension liabilities total more than $2 trillion — about three times the total reported by governments.

The three states with the most outsize pension burden are:

  • Illinois – 241%
  • Connecticut – 189.7%
  • Kentucky – 140.9%
  • The three states with the least outsize pension burden are:

  • Nebraska – 6.8%
  • Wisconsin – 14.4%
  • Idaho – 14.8%
  • One important thing to remember about Moody’s Investment Service is that they are apolitical. All they care about is the bottom line dollar figure. They don’t care about approval polling or favorable press or the position a state has on gun control, immigration policy, or climate change. They just want to see the bottom line.

    Personally Gov. Scott Walker of Wisconsin has the most impressive record of all of the Governors. Wisconsin is a lot more liberal than Nebraska or Idaho, yet Gov. Walker managed to lead Wisconsin to pass laws that increased worker contributions to health and pension plans and impose collective bargaining restrictions. In addition, Governor Walker signed a law requiring a two-thirds supermajority in both legislative chambers to raise income, sales, or franchise tax rates. These changes saved money at both the state and local levels of government, and public sector unions fought him tooth and nail every step of the way. The neighbors to the south in Illinois ought to learn some lessons from Wisconsin, but somehow it doesn’t seem likely to happen.

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