Put differently: the pension liability per year is 6.675 billion. Illinois rakes in about $45 billion per year in taxes.
That's at most "awkward" to handle and at best "easy" and possibly even trivial.
You cannot do this.
Say there is a discount rate of 8% and you owe $100 per year for 20 years. That's a NPV of about $980.
Then you say, $980 divided by 20 years is only $49! It's nothing. You just turned an obligation of $100 per year into $49 per year.
See, the pensions, when they say they have a shortfall of X, what they mean is that if they got X today, and invested it with their expected rate of return, in the future they would have what they need to pay out their obligations. They are not saying that their obligations are X when they are added together across time without discounting.
Second, in the case of pension funds, the discount rate is how much they think they can earn with the money. The pension industry has different assumed rates of return, but the most consistent one I've heard is 8%, which in today's world of secular low rates is insane. There is a whole world here of pension funds reaching for yield as risk free instruments drop to very low rates, and this is by far a much bigger impact on pensions than anything else and something not talked about when people cheer low interest rates. This is causing pension funds to be in shortfall all across the world.
There is also the issue that some pension plans contain provisions for health insurance, which is also hard to predict.
So I'm not saying I have the right number, but without knowing their discount rate or future obligations, you are not going to be able to get a good number.
It's a two tier system, the first government funded, and of course the Japanese government is in enormous debt, but not because of pensions. The government funded pension is like welfare, it's very small, is fixed in amount for everyone, and funded by contributions. It would be what social security is if the amount was tiny -- say $200 per month -- and fixed for everyone regardless of how much they pay in, even though everyone pays in a bit less than 1% of their salary. It is a system not dependent on positive rates of return.
The second system is the main source of pensions for people and is employer/employee funded. It is also quite austere -- you pay in 18% of your income in year 1 and that amount increases by 0.25% each year. Of course only half is deducted from your paycheck, the rest from the employer, but it is effectively taken out of the worker's paycheck.
What you get when you retire is ~0.55% of your total lifetime wages each year. This amount is fixed in nominal terms -- there is no inflation, cost of living adjustment, etc. You get this fixed amount every year. That means that by design the system is solvent because even if nothing is invested and the money earns 0%, if you work for 30 years and never get a raise, you will have paid in an average of ~22% of your lifetime wages which will fund 32 years of retirement pension after 30 years of working. But a normal person will get raises, and as they get raises over time, they earn more later in life when their percentage contribution goes up, so pensions are well funded even for a population with long lifespans and low interest rates. Then of course people have private savings in addition to pensions.
Needless to say, Americans would riot if you told them they need to increase their social security contribution from 15% to 18%, with no cap, and that this amount goes up every year, and then what they get would be only 0.55% of their lifetime earnings with no COLA. That means someone earning the median per-capita income of about 31K for 40 years of work would get $570 per month in social security benefits after paying in an average of $594 per month over 40 years. But again, our system is designed for people who die younger and work in an economy with decent rates of return.
But if we adopted a Japanese style system, social security would be permanently in the black regardless of interest rates.
So does that mean the average retired Japanese person is living on less than $1k per month?? How are they doing that? Isn't Japan pretty Urban and the cities relatively expensive to live in?
In Japan 2/3 of the average person's retirement income is pension benefits and 1/3 is savings, so Japanese augment their frugal pensions by saving a lot. Even so, 1 in 6 Japanese live in poverty, and 1 in 5 seniors live in poverty, suggesting that the low pensions play a role and that some Japanese are suffering because of this (https://www.japantimes.co.jp/news/2019/06/04/business/financ...)
In terms of Japan being expensive to live in, it depends on your lifestyle. You can certainly spend a lot of money in Japan, but the median household income in Japan is about 40K (source: http://nbakki.hatenablog.com/entry/Distribution_of_Yearly_Ho.... more salary breakdowns here: https://resources.realestate.co.jp/living/average-salary-jap...) so assuming 2 people, that's about $1700/month per person, so a pension of $1000/month is completely unsurprising.
Private consumption in Japan, as a share of GDP, is about 10% less than in the U.S. E.g. they consume about 57% of GDP and we consume about 67% of GDP. This includes consumption of fixed capital. If you back that out, the median Japanese household is just much more frugal than the median US household, and it's not all increased out of pocket healthcare spending (source: https://www.bls.gov/opub/btn/volume-6/how-do-united-states-c...). They really are more frugal and more risk averse than US households.
Thus, social security is much more than a pension program, it's actually a significant transfer that causes seniors to have lower poverty rates than working-age Americans.
And because the underfundedness compounds (if you have less capital, then you fall farther behind because your growth is on your capital being as projected), they're in real trouble.
https://www.illinoispolicy.org/illinois-241b-pension-debt-st...
It's widely acknowledged that most states' assessments of their own unfunded liabilities are borderline fabrications, because they assume unrealistic rates of return. Illinois assumes 6.75-7.25% rates of return on pension investments. The average discount rate for corporate pension plans is under 4% (and even with that low discount rate, they're 90% funded on average): https://www.pionline.com/article/20180430/PRINT/180439976/20....
Reducing expectations for existing participants is the same as defaulting on a loan, and I see no reason for why pensioners should be getting haircuts, while lenders get every penny they are owed.
1) Pensioner debt in Illinois is about $250 billion, versus $65 billion for other kinds of debt. Any debt restructuring will necessarily have to see pensioners carry most of the water.
2) Defaulting on loans makes it very difficult to access the capital markets for things current and future residents need. (Long term bonds to pay for transit projects, etc.) Cutting pension obligations doesn’t have that problem.
So make both pensioners, and lenders share the pain. Don't just dump all the problems onto one or the other. It was the lender's fault for not taking into account the possibility of default of a creditor with large outstanding financial obligations.