Illinois’ public pension crisis continues to deepen, with unfunded liabilities reaching $143.7 billion—an increase of $1.5 billion over the past year. Despite strong investment returns exceeding 8%, growing obligations outpaced these gains. The funding ratio rose slightly from 44.6% to 46%, but this marginal improvement offers little comfort to Illinois taxpayers facing an ever-growing financial burden.

Key drivers of the crisis include higher-than-expected salary increases and longer life expectancies among retirees. Tier 1 employees, in particular, benefit from generous cost-of-living adjustments (COLAs) that compound annually at 3%, creating unsustainable growth in liabilities. Attempts to alleviate the crisis, such as buyout provisions and Tier 2 reforms, have only provided incremental relief.

In stark contrast, Wisconsin’s pension system demonstrates how proactive planning and fiscal discipline can maintain long-term sustainability. Wisconsin boasts one of the nation’s most secure pension systems, with a funding ratio exceeding 100% in recent years. The Wisconsin Retirement System (WRS) employs a shared-risk model where both employees and retirees share the impact of market performance. During years of strong investment returns, retirees receive dividend increases, while in downturns, benefits are adjusted downward.

Illinois’ reliance on Tier 2 reforms, implemented in 2010, has provided some relief by raising the retirement age, adjusting COLAs to inflation, and capping pensionable wages. However, the structural issues remain unresolved due to constitutional restrictions on benefit reductions. Unlike Illinois, Wisconsin’s governance model allows for adaptability, helping to mitigate future liabilities.

While Illinois grapples with underfunded pensions and ballooning obligations, Wisconsin’s WRS serves as a model for other states. Its balanced approach ensures that taxpayer contributions remain stable, benefits are protected, and the system remains solvent. Illinois policymakers might look to Wisconsin’s success for guidance, focusing on shared risk, sustainable COLAs, and constitutional reforms to address systemic challenges.