The Illinois Legislature’s Commission on Government Forecasting and Accountability recently released an analysis of a union-backed pension reform plan. The study concluded that the proposal, House Bill 5909, would cost taxpayers almost $30 billion through 2045. Starting in fiscal year 2027, which begins in mid-2026, the annual state cost would be $1.13 billion.
The state is bracing to deal with a $3.2 billion deficit in the upcoming 2026 fiscal year. The projection for the following fiscal year, FY27, anticipates a $4.3 billion deficit. Adding another billion-plus on top of that seems untenable.
This estimate only includes the “Big Three” pension plans (state, university, and teachers). It excludes local pension funds like the Illinois Municipal Retirement Fund, first responder funds, and the pension funds for judges and legislators. Union members flooded the statehouse during the November veto session, demanding changes to the state’s Tier 2 pension program. The public employee unions have opposed Tier 2 since the General Assembly and Gov approved it.
Pat Quinn in 2013. The change was intended to force newly hired employees to accept a significantly reduced pension package because of the large and growing costs of the existing plan. The state constitution forbids reducing any pension benefits once granted, so the change could only be made to new hires going forward.
Segal, a consulting firm often used by the commission, conducted the actuarial report. Segal also analyzed an earlier version of Tier 2 pension reform (HB 4973), which found that it would cost state and local governments a net $4.6 billion by 2045.
Illinois pension plan faces budget challenges
Despite this, unions backed the new bill introduced in November. Gov. JB Pritzker told reporters he would “if necessary” agree to ensure all pension systems complied with Social Security’s safe harbor provisions, which require pension benefits to be at least as high as Social Security payments.
An earlier analysis pegged that cost at $4.8 billion for all systems. The latest analysis of the new bill has the safe harbor cost at $6.2 billion just for the big three funds. According to the new commission report, the union-backed changes to the final average salary calculation would cost an additional $1.1 billion through 2045. A redo of the annual cost of living adjustment payments would add $4.4 billion, and lowering the retirement age for Tier 2 recipients to equal Tier 1 recipients would cost $11.3 billion.
The total price is $29.76 billion, with the first additional payment of $1.132 billion owed in FY27, on top of the projected $10.8 billion projected pension payment that fiscal year. The previous Tier 2 bill included a $500 million annual funding source using revenues freed from retiring debt. The price tag would’ve been just $47 million in the coming fiscal year, starkly contrasting the new proposal.
Gov. Pritzker has expressed his concerns about the union-backed bill. His spokesperson emphasized that the governor “will not support any pension proposal that is credit negative or threatens the State’s balanced budget.” Adding $1.1 billion annually to the state’s outlays would be too much of a budget hit.
Even the proposal’s Senate sponsor, Sen. Rob Martwick, D-Chicago, conceded that the state cannot afford the plan. Martwick called his bill a “great starting point” in negotiations but acknowledged, “The unfortunate reality is that Illinois and Chicago are such financial disasters that we very well cannot afford to do the right thing.”
