Illinois Comptroller Susana Mendoza believes the state’s pension system is moving in the right direction. The state’s pension debt has been a significant issue for years. Last year, the Commission on Government Forecasting and Accountability reported that Illinois’ pension debt grew by about $2.5 billion.
Recently, Mendoza made the first pension prepayment under a new law. This change allows her to pay more into state pensions earlier in the year. Mendoza explained that prepaying monthly state contributions lets retirement systems keep their assets invested longer, which helps generate better returns. This could improve the financial health of the pension systems and potentially reduce the amount the state needs to contribute in the future.
Mendoza said that by prepaying $422 million of the state’s monthly pension contributions, the funds could remain invested for a few months longer, which might generate an additional $7 million.
Governor J.B. Pritzker, in his fiscal year 2025 budget proposal, said extending the funding plan by three years would help the state achieve full funding, similar to other states. The current goal, set in 1994 by then-Governor Jim Edgar and the Illinois General Assembly, is to reach a 90% funding ratio by 2045.
In January, the Illinois Supreme Court supported the consolidation of local police and firefighter pension systems. This decision upheld a law signed by Pritzker in 2019 aimed at boosting investment power and reducing administrative costs for hundreds of municipal funds.
Mendoza expressed her satisfaction with the General Assembly and the Governor for approving this change in Illinois law. She noted that some people might think her office only pays bills, but they are always looking for creative ways to add value for Illinois taxpayers.
This new law and the early payments are part of a broader effort to stabilize Illinois’ pension system. The state’s pension debt has been a longstanding issue, and these measures aim to address it more effectively. By allowing funds to stay invested longer, the state hopes to generate more returns, thus improving the pension systems’ financial condition.
Governor Pritzker’s budget proposal also highlights the importance of extending the funding payment plan. By adding three more years, the state aims to achieve a fully funded pension system, aligning with the financial stability seen in other states. This extension builds on the 1994 plan, which aimed for a 90% funding ratio by 2045.
The consolidation of local police and firefighter pension systems is another significant step. By merging these funds, the state aims to increase investment power and reduce administrative costs. This consolidation is expected to enhance the overall efficiency and effectiveness of the pension system.
Comptroller Mendoza’s efforts and the new prepayment law demonstrate a proactive approach to managing the state’s pension debt. By taking these steps, Illinois aims to ensure a more stable and secure future for its pension systems. The additional returns generated from early payments and the consolidation of pension funds are expected to contribute significantly to the state’s financial health.
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In conclusion, Illinois is taking important steps to improve its pension system. The new prepayment law, Governor Pritzker’s budget proposal, and the consolidation of pension funds are all part of a comprehensive strategy to address the state’s pension debt. Comptroller Mendoza’s optimism reflects the positive impact these measures are expected to have on Illinois’ financial stability. By ensuring that pension funds remain invested longer and by extending the funding plan, the state aims to achieve full funding and create a more secure future for its retirement systems.
