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Stock market continues impact on Illinois' pension investment returns

(The Center Square) – The U.S. stock market has had rough year and it’s hurting Illinois’ underfunded pension system.   

By the middle of 2022, the stock market had lost approximately 21.3 percent of its value. This has an impact on government finances, as public pension systems rely on investment gains to help their funded status.

A report by Truth in Accounting shows how the Illinois pension system is affected by the U.S. stock market. 

Illinois’ public sector pension system is partially funded by the investment returns in certain stocks and bonds. As the U.S. stock market struggles, so does the Illinois’ pension system.

Sheila Weinberg of Truth In Accounting explained how taxpayers are being affected by the happenings on Wall Street.

“The taxpayer liabilities on these are volatile,” Weinberg said. “If the market takes a hit, then the assets are worth less, and therefor in the future, taxpayers could be asked to contribute even more to their pensions to cover the gap.”

Illinois has among the most unfunded public pension liabilities in the nation. While the state’s auditor general has Illinois’ unfunded liability at around $140 billion, the American Legislative Exchange Council recently put the figure at $533 billion. Nationwide, the number is $8.2 trillion. 

This leaves many state workers with underfunded pensions and results in the state making riskier investments, according to Weinberg.

“The state will try to lessen the high liability of the system by having more assets, so they have a tendency to take more risk in their investment,” Weinberg said. “As we all know, the stock market can be very volatile.”

Weinberg said even if the stock market does great, it can’t make up for Illinois’ unpaid liabilities.