Illinois pensions have entered the death spiral, as they fall further behind in FY 18 even with strong investment returns. The funds have $223 bln of liabilities growing at assumed rate of 7% a year ($15 bln). But with assets of only $90 bln, must earn 17% just to stay even.
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For Illinois' FY '18 which ended in June, the S&P rose 14.2% including dividends. The 5 largest pension funds in Illinois earned 6.9-8.3%. Even after a larger cash contribution from the state, the funds fell $4 bln further behind. What happens in a year when the market is down??
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Replying to @JohnArnoldFndtn
Illinois has a shrinking population with employed population that is shrinking, fewer taxpayers. There are however more government employees though, so maybe more worker contributions. Transfer payment systems don't work well with shrinking working populations, growing retired.pic.twitter.com/1WFhlORu4o
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Imho, much more likely that the state declares bankruptcy (illinois has a law saying that the pensions can't get cut) when things start to get real bad. Government workers would find other non-govt work when confronted with transfer payments to older generations.
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