Illinois has promised $166 billion in retiree health insurance benefits to public-sector workers over the next 38 years. Actuaries say the state should have $73 billion invested today so it can safely make those payments in the future. The problem is, the state hasn't set aside anything at all.
That $73 billion hole is yet another financial time-bomb – one that's been totally ignored thus far by Illinois' lawmakers, civic leaders and the media. Unfunded healthcare promises have grown 80 percent in the past decade and are now compounding Illinois' state and local pension crises.
Illinois courts have ruled that public employee health obligations, like pension benefits, cannot be impaired. Unlike pensions, however, nothing is set aside and invested to cover that future expense. The liability is entirely unfunded, which is called a "pay-go" system. Instead of setting aside money for future costs, the state simply pays retiree healthcare costs as they are incurred. Growing future costs are left to future budgets.