SPRINGFIELD -- Illinois need only look north to Wisconsin to find a state that has not only managed to keep up with public pension requirements, but is one of a select few meeting 100 percent of its funding obligations.

Part of Wisconsin's success has been its diligence in fully funding the system each year and in keeping costly pension benefit add-ons in check, said David Stella, secretary of the Wisconsin Department of Employment Trust Funds.

So while many states, such as Illinois, find themselves struggling with a sluggish economy and ever-escalating pension debt, Wisconsin's system is healthy, he said.

"Because we had funding discipline in the past, it's actually led to a better situation because we don't have the mounting debt," Stella said.

The same cannot be said for Illinois, which owes $44 billion in pension payments, earning it the distinction of being the worst funded pension system in the country.

Illinois' problem is that for decades the state skimped on its annual share of funding for the pension system, shifting state resources to other programs with the expectation that it could catch up on pension payments later.

But as the unfunded debt has grown, the state now finds itself in an untenable situation, said Ralph Martire, executive director of the Center for Tax and Budget Accountability.

"The pension system has been used as a credit card to fund health care, schools and (other programs) and now the credit card bill is due," he said.

In its report, "Promises with a Price," the Pew Center on the States found that states with poorly funded pension systems have often failed to make required contributions, boosted pension benefits or made overly optimistic actuarial predictions.

Simple comparison

The report includes a direct comparison between Illinois and Georgia, two states with similarly sized retirement plans but very different outcomes. In 2006, Georgia's pension system was 96 percent funded and Illinois' was at 60 percent.

"It's pretty clear that Illinois has a larger (pension debt) problem than most states," said Katherine Barrett, one of the study's principal authors.

"Some states have just been more careful about it. There's a culture toward looking to the future," she said.

For example in 2006 when it came time to make the annual state pension contribution, Georgia made its full payment while Illinois only put in 33 percent of its annual share that year, according to the report.

Years of underfunding have taken a toll. While Georgia's unfunded pension obligations account for 3 percent of total state expenses, Illinois' make up 38 percent, according to the report.

"This is a problem that will get worse," Barrett said of state's pushing off pension debt. "At some point when there's a critical number of retirees collecting (pension) checks you won't be able to put it off anymore."

Barrett said some states, such as West Virginia, are trying to turn things around.

Long one of the worst funded pension plans, West Virginia has ramped up annual payments in recent years boosting its system's funding ratio from 39 percent in 2003 up to 55 percent by 2006, according to Barrett.

The slowing economy is having an impact on pension funding ratios in many states and could continue to do so, according to a 2006 comparative study on state public employee retirement systems done by the Wisconsin Legislative Council.

In 2000, 33 plans were funded at more than 100 percent. By 2006, that had dropped to 7 pension plans.

States are making other changes. The National Conference of State Legislatures tracks state pension trends and found that many states are limiting benefit increases, shoring up funding and reducing benefits for new employees.

Aside from Alaska in 2005, few have switched to defined contribution, or 401(k)-style plans, according to the group.

A defined benefit plan, such as a pension, guarantees payments to a retiree at a certain level.

"In a defined contribution plan, the state gives a flat amount of money to the plan, instead of an amount guaranteed to provide a specific level of payments when a person retires," he said.

Some have suggested Illinois go that route as many private-sector employers have done in the last nearly 30 years.

In 1979, according to the Employee Benefit Research Institute, 62 percent of private-sector employees participated in a traditional pension retirement program while only 16 percent had 401(k) plans.

By 2005, those numbers had flipped with 63 percent of private-sector employees in 401(k) programs and only 10 percent with pensions. The rest had a combination retirement plan, according to the institute.

Martire said tighter federal rules on private-sector pension programs prompted many employers to shift away from traditional pensions. But those rules don't apply to public pensions and the cost of administering a 401(k)-style program can be more expensive for a state, he said.

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