Tag Archives: economics

Understanding Illinois’ $187.7 Billion Unfunded Liability

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Illinois faces the highest debt-to-asset ratio of any U.S. state at 468.7%, meaning the state owes nearly $5 for every $1 in assets. The $187.7 billion net unfunded liability represents a structural deficit that requires either massive tax increases, spending cuts, constitutional pension reform, or a combination of all three to address. The delayed financial reporting raises additional concerns about transparency and the actual current state of the finances, which could be worse than these already dire figures suggest.

Total Illinois Government Obligations – Comprehensive Picture

Total State Liabilities: $248.67 billion Total State Assets: $53.05 billion

Net Unfunded Liability: $187.7 billion in unfunded liability

Debt Ratio: 468.7%, the largest in the U.S.

This means every person in Illinois’s 12.7 million population would need to pay $14,780 to eliminate the state’s unfunded obligations.

Breakdown of Major Obligation Categories

1. Pension Unfunded Liabilities: $143.7 billion (as of latest COGFA report)

  • This represents the largest component of the state’s obligations
  • Pension obligations are not constituted of borrowing or financing, but rather are actuarially estimated payments that the State is obligated by law to pay in the future

2. Bonded Debt: $38.1 billion in total outstanding debt

  • Over the past ten years, the State of Illinois has reduced its total amount of outstanding debt by 13.5%, or $5.9 billion, from $44.0 billion to $38.1 billion

3. Major Bond Categories:

  • General Obligation (GO) bonds for capital projects, GO bonds for pension obligations, GO bonds to pay backlogged bills and Build Illinois revenue bonds
  • Pension Obligation Bonds: $8.4 billion in principal and interest is scheduled to be paid by the maturity date of June 2033
  • Bill Payment Bonds: $2.8 billion in principal and interest is scheduled to be paid by the maturity date of November 2029
  • Pension Buyout Bonds: $1.8 billion of $2.0 billion authorized has been issued

Critical Financial Reporting Issue

Severely Delayed Financial Reporting: Illinois still has no ACFR for 2023, a fiscal year that ended over 565 days ago, while states have averaged just 200 days to publish their ACFRs. This means the most current comprehensive audited financial data is over 2.5 years old.

Actionable Financial Impact Details

Annual Debt Service Growth:

  • Current pension contributions: $11.2 billion in FY 2025
  • Projected to grow to $18.5 billion by 2045
  • Governor Pritzker’s FY2026 budget proposal projects a year-over-year reduction in debt from the prior year of approximately $200 million, or 0.5%

New Bond Issuances: The State plans to issue nearly $2.1 billion in new GO bonds to fund capital projects in FY 2026, up from $1.3 billion in FY 2025.

Additional Context – Local Government Debt

The state-level figures above don’t include local government obligations. Historical analysis suggests that when including all state and local retirement obligations, state and local governments in Illinois owe more than $203 billion for pensions and retiree health insurance (though this figure is from 2017 and would be significantly higher today).

Hunker down folks we are heading into a depression!

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I will not profess to be an expert on economics, far from it, but what I think I do have is a sense of reality. My sense of reality is that the United States, if not the entire world, is heading into a depression similar to 1929. I base my prediction, not on fancy statistics on money supply, money multipliers, Keynes versus the Monetarists, rather I base my prediction of the future based on simple demographics. And there is only a single statistic one need to understand to see where we are headed. For our economy to remain vibrant, we need consumption of goods and services. Each dollar that is spent on consumption has a multiplier effect in the economy. So, when I purchase a particular good or service, that purchase adds money to the economy which in turn creates additional spending producing that good or service, and so on and so forth. So the impact of that single purchase has a ripple effect. Now… as one moves through life we go through purchasing stages. We start by purchasing our first home… which creates a stimulus. Think of the home as a “nest”… this nest is where our consumption begins. First we furnish the nest, then we fill the nest with children, and then we move up to a bigger nest, and again repeat the furnishing pattern. All along the way… we are consuming goods and services. Typically one is a net consumer of goods and services, ie we spend more than we produce, from the age of 20-50. This 30 year period I call the consuming years. From 50 until we die we slowly become negative consumers. From 50 and beyond we downsize our nests, the kids move out, and we generally consume far less goods and services. And in many ways we are negative consumers. WE save money, we invest in our retirement, and ultimately we live off our retirement savings plus Social Security. This brings me to my simple demographic statistic that tells me we are headed towards a depression. 1959 was the last year of the “baby boom”… the generation behind this “boom” is far fewer in number. Given this the number of “consumers” compared to “negative consumers” is reversed. We have entered a period where there is going to be far less consumption, and without consumption of goods and services, our economy will contract. Depending on how significant the drop in consumption, will impact the severity of the coming depression. Again looking at simple demographics, the “baby boomer” generation family size typically was 3-4 children, but the following generation saw family size more in the range of 2-3. This means consumption in the United States could drop by 25-50% simply based on population changes. Given this, a depression is unstoppable… and this depression will likely last for 5 years as the entire economy adjusts to lower consumption. In the meantime, home prices will collapse, the stock market will plummet, and unemployment will rise dramatically. My advice is to move to cash or commodities and away from stocks, homes, or similar assets. I hope I am wrong, but demographics are not favorable. And for god’s sake ignore your broker’s advice.