Chicago’s Morning Answer hosts Jeanne Ives and Jim Iuorio, filling in for Dan Proft, welcomed Gregory Kearney, a research associate at the Hoover Institution, to discuss recent research he co-authored examining the growing share of education spending nationwide consumed by public pension obligations, with Illinois emerging as one of the most severe cases in the country. Ives noted that her own analysis of Governor Pritzker’s fiscal year 2027 budget found that pension costs account for more than 19 percent of total state spending, and that the figure would rise to 26 percent, adding roughly five billion dollars, if funded at the level actuaries consider prudent.
Kearney said he and his co-author, Josh Rauh, began the project by tracking how pension contributions as a share of covered employee spending have changed nationally since 2015, and said Illinois stood out immediately once the data was mapped across states. He said nationwide pension contributions have risen roughly two percentage points as a share of compensation costs since 2015, translating into billions of dollars, but that Illinois’s increase over the same period was roughly three times that national figure. Kearney said that if Illinois had maintained its 2015 pension cost share, the state would have freed up roughly one point seven billion dollars for other spending, potentially including classroom resources or additional staffing.
Kearney and Ives discussed the scale of the problem within Illinois higher education specifically, noting that pension costs account for a substantial share of total state higher education spending even as universities and colleges continue to describe themselves as underfunded. Kearney cited data from national reports on state higher education finance showing Illinois consistently ranks near the top nationally in per-student state funding, but that a large share of that money is earmarked specifically for pension obligations rather than instruction, a pattern he said helps explain why in-state tuition in Illinois remains among the highest of any state university system nationally.
Ives, who served on the state pension committee as a legislator, argued that the state’s current defined-benefit pension structure for new hires is fiscally unsustainable and said she has long supported transitioning new public employees into 401k-style retirement plans, which she said would not require amending Illinois’s constitutional pension protections. She also criticized recent changes affecting whether Illinois teachers qualify for federal Social Security safe harbor exemptions, arguing that any reform should be applied on an individualized basis given wide disparities between average teacher pensions and far larger payouts received by some administrators.
Kearney expressed skepticism that meaningful reform is likely in the near term, citing continued outmigration of income from Illinois to lower-tax states and warning that raising taxes further could erode the tax base rather than solve the underlying funding gap. He and Ives also discussed the possibility that a future economic downturn could push Illinois or other financially strained states to seek a federal bailout of their pension systems, drawing a comparison to Illinois’s early pandemic-era request for federal assistance explicitly tied to shoring up its pension funds. Kearney said any such bailout would likely trigger similar requests from other states, given that taxpayers in fiscally healthier states would have little incentive to accept a one-state rescue without seeking comparable relief themselves.