Blagojevich Releases Proposal to Pay Illinois Pension Deficit

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 ).