Blagojevich Releases Proposal to Pay Illinois Pension Deficit

March 6, 2007 ( - Illinois Governor Rod Blagojevich has proposed using money from privatizing the Illinois lottery to help struggling pension systems.

The governor’s budget office said Monday that Blagojevich also wants to borrow money at low interest rates to pay off high-interest pension debt, according to the Associated Press.

Together, the governor’s office said, the two strategies would generate $26 billion for the retirement funds of downstate teachers, state government workers, lawmakers and more.

“We can infuse significant upfront money into the state’s pension system,” Justin DeJong, a spokesman for the governor’s budget office, told the Associated Press. “This is unarguably the greatest fiscal challenge the state has ever faced.”

The state pays 8.5% interest on the pension debt, so it could come out ahead by borrowing money elsewhere at a lower rate then using that money to pay off part of the pension obligations, according to the AP.

The state’s unfunded pension liability was $42 billion at the end of the last budget year – the worst mark in the country.

In December, a Chicago business group raised concerns about the state’s ability to fund retirement and health coverage costs for state workers, claiming taxpayers will eventually have to pay more than $100 billion in unfunded pension liabilities and nearly $50 billion in unfunded health coverage expenses (See Chicago Group Sounds Pension, Health Funding Alarm ).