Illinois: Tier 2 Pension Costly Benefit Increases Supercharge the State’s Pension Crisis, and Local Governments Would be Hit Hardest

MAY 6, 2026

Illinois’ public pension systems are in severe crisis, with chronic underfunding threatening retirees, taxpayers, and the state’s fiscal stability. Truth in Accounting has reported on this issue for years, highlighting how the state’s failure to make full actuarially determined contributions (ADC) has exacerbated the problem. As of fiscal year 2024, Illinois’ pension systems face $148.6 billion in unfunded liabilities, with a funded ratio of just 47.8%. This is well below the 65% threshold considered critical under private sector pension funding standards established by federal law. Pension payments consume approximately 20% of the state budget, crowding out investments in education, infrastructure, and public services. Benefit increases without corresponding funding adjustments will worsen the state’s long-term pension imbalance.