Tough Choices for the Illinois Pension System
This case describes the precarious fiscal situation of the Illinois public pension system in the spring of 2009 and the accounting of pension plans by non-federal municipalities more generally. In February 2009, in the midst of a recession, recently-appointed Governor Quinn had to lay out his budget for the coming fiscal year and tackle the state's underfunded public pension, its largest liability. Immediately, the Governor needed to raise funds to make the state's annual contribution to the pension plan, at the same time, he needed to come up with a plan for pension reform to prevent the future insolvency of the state. Governor Quinn had a number of levers he could employ including changing the asset allocation of the pension funds, directly tackling entitlements through a Defined Benefit or Defined Contribution plan, or through a package of pension bonds, taxes and employee contributions. Through this case, students should more fully understand pension accounting and understand the hard choices that many states will face because of their outstanding pension liabilities.