Illinois officials: Pension change could be 'devastating'

CHICAGO (AP) — Gov. Bruce Rauner's administration says a pending move by Illinois' largest public-pension fund would increase the state's required payment by hundreds of millions of dollars, potentially leading to higher taxes or massive cuts to education and social services already suffering amid a budget crisis.

A reduction would trigger a larger contribution from the state, where the Republican governor and Democrat-led Legislature have gone more than a year without agreeing on how to close a multibillion-dollar budget hole or address a $111 billion unfunded pension liability.

"Unforeseen and unknown automatic cost increases will have a devastating impact on the state's ability to provide adequate resources to social service programs and education," Michael Mahoney stated in a memo sent Monday to Rauner's chief of staff.

The possible board action comes as pension systems nationwide are reporting lackluster returns for the most recent fiscal year, and analysts and credit rating agencies are increasingly pressuring them to lower assumptions to ensure there's enough money to pay benefits.

To cover benefits as promised and make up for years of missed payments and investment returns, Illinois' contribution to its five pension funds this year will be about $7.8 billion — roughly one-fifth of its general revenue fund.