Illinois pension debt rate nation’s worst, Moody's report says

Illinois’ pension liability as a percentage of state revenue is far and away the nation’s highest, according to a new report from a major credit-rating agency.

The state’s three-year average liability over revenue is 258 percent, Moody’s Investors Service says.

The next closest? Connecticut, at about 200 percent.

The Moody’s report averaged the Illinois percentage from 2010 through 2012. In 2012 alone, the state’s rate was 318 percent.

The state has a $100 billion deficit in the amount of money that should be invested in the portfolios of five state-employee pension accounts. Lawmakers adopted an overhaul plan last fall that cuts benefits and increases worker contributions to significantly cut that debt.

But the law has been challenged in court. A Sangamon County judge indicated last week he wants the case moved swiftly to appellate courts, suggesting the Illinois Supreme Court’s rejection in July of a law affecting retiree health insurance could prove a model for the pension challenge.

Moody’s points out that even if the pension overhaul gets constitutional approval from the state’s high court, it still will take decades for Illinois government to dig out of its financial hole.

Moody’s first released a state-by-state ranking of “adjusted net pension liability” in June 2013, when it put the Illinois rate at 241 percent. The latest report, focusing just on Illinois, doesn’t give specific percentages for those trailing the state, but Moody’s said 15 months ago that Connecticut was at 190 percent and Kentucky at 141 percent.

The median percentage for all states at the time was 45 percent. In the latest report, Moody’s sets that level at 51 percent.

Several larger states, similar to Illinois, are well below the median and rank in the 10 lowest percentages of adjusted net pension liability, including Ohio, Florida and New York. The group also includes Illinois neighbors Iowa and Wisconsin — the latter having the lowest level next to Nebraska.

Only three others states — New Jersey, Hawaii and Louisiana — have rates higher than 120 percent.

Adjusted net pension liability is a calculation Moody’s says it uses to “achieve greater comparability and transparency” by recalculating state and local net pension liabilities based on a market-determined discount rate and the market value of assets.

For the 2012 budget year, Moody’s says Illinois had an unfunded actuarial accrued liability in its pension programs of $93 billion and an adjusted net pension liability of $187 billion, yielding liabilities as a percentage of revenue of 318 percent.

ASSOCIATED PRESS