Ooops! Illinois pension crisis much worse than thought

The state of Illinois has already been punished by the SEC for perpetrating securities fraud - misleading investors about problems with its pension system. Now it appears that the problems with their pension plans - the most severe in the nation - are actually much worse than originally thought. Moody's Investors Service reported that Illinois' true unfunded pension liability in fiscal year 2011 was nearly 65% higher than the state's official estimate. In its report titled "Adjusted Pension Liability Medians for U.S. States," Moody's calculated the unfunded liabilities for Illinois' three largest state-run pension plans at $133 billion, compared to the state's official calculation of $81.3 billion. Illinois' pension funds use overly optimistic assumptions in calculating their unfunded liability, including an expected 8% yearly average investment return. The new Moody's methodology uses more realistic market rates based on high-quality corporate bonds. The rate...(Read Full Post)